iBio, Inc. v. Fraunhofer USA, Inc. ( 2016 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
)
IBIO, INC., )
)
Plaintiff, )
)
v. ) C.A. No. 10256-VCMR
)
FRAUNHOFER USA, INC., )
)
Defendant. )
MEMORANDUM OPINION
Date Submitted: April 29, 2016
Date Decided: July 29, 2016
Mary B. Graham, Megan Ward Cascio, Thomas Curry and Anthony D. Raucci of
MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware;
Attorneys for Plaintiff iBio, Inc.
Robert J. Katzenstein of SMITH, KATZENSTEIN & JENKINS LLP, Wilmington,
Delaware; Thomas C. O’Brien, Kimberly L. Scott and David D. O’Brien of
MILLER CANFIELD PADDOCK & STONE, Ann Arbor, Michigan; Attorneys
for Defendant Fraunhofer USA, Inc.
MONTGOMERY-REEVES, Vice Chancellor.
This decision sprouts from a dispute regarding the extent of discovery to
which the plaintiff is entitled, but has significance that extends far beyond that.
Plaintiff iBio, Inc. and defendant Fraunhofer USA, Inc. are two biopharmaceutical
companies that have enjoyed a relatively successful commercial relationship. The
parties’ relationship stagnated and then came crumbling down when a third-party
company—PlantForm Corporation—entered the picture. Fraunhofer agreed to
provide PlantForm—which also happens to be one of iBio’s competitors—with
certain products and services. iBio then sued PlantForm and, after Fraunhofer
intervened in that action, sued Fraunhofer as well, claiming that they were
interfering with iBio’s contractual rights and misappropriating iBio’s intellectual
property. Although iBio and PlantForm settled, the parties’ dispute pressed on.
In this decision, the Court addresses the following threshold question: “What
is the scope of the technology in Fraunhofer’s possession -- under all of the
relevant agreements between the parties -- to which iBio has ownership rights and
to which iBio is entitled to receive a transfer from Fraunhofer?”1 For the reasons
stated in this Memorandum Opinion, I resolve that threshold question in iBio’s
favor.
1
iBio, Inc. v. Fraunhofer USA, Inc., C.A. No. 10256-VCMR, at 7-8 (Del. Ch. Jan.
6, 2016) (TRANSCRIPT).
1
I. BACKGROUND
The parties largely do not dispute the underlying facts. Instead, they focus
their attention on their competing interpretations of the relevant agreements
between the parties. For simplicity’s sake—and because the facts of this case do
not bear on this decision’s ultimate resolution—I recount the facts as pled in the
Verified Amended Complaint (the “Complaint”). I do so without drawing
inferences in either party’s favor and mostly for background and contextual
purposes. From a procedural standpoint, I treat it as a stipulation for decision on
the merits on the record submitted.2
A. Parties
Plaintiff iBio, Inc. (“iBio”) is a Delaware corporation that “develops and
commercializes plant-based technology, and products derived from such
technology, for human biopharmaceuticals and other applications.”3
Defendant Fraunhofer USA, Inc. (“Fraunhofer”) is a Rhode Island non-profit
corporation that owns and operates several scientific research centers throughout
2
See Am. Legacy Found. v. Lorillard Tobacco Co., 886 A.2d 1, 18 (Del. Ch. 2005)
(“[U]nder Court of Chancery Rule 56(h), since neither party argues that there is a
disputed material issue of fact, the court deems the cross-motions to be the
equivalent of a stipulation for decision on the merits on the record submitted.
Thus, the usual standard of drawing inferences in favor of the nonmoving party
does not apply.” (citing Ct. Ch. R. 56(h))), aff’d, 903 A.2d 728 (Del. 2006).
3
Compl. ¶ 1.
2
the United States, including the Fraunhofer USA Center for Molecular
Biotechnology (the “Center”) located in Newark, Delaware. The Center conducts
research and development in a number of scientific disciplines, including
pharmaceutical biotechnology.
B. Facts
1. The parties begin their commercial relationship
According to the Complaint, in the early 2000’s, iBio sought to develop
nascent plant-based technology to make proteins for human vaccines and other
biotherapeutics.4 In particular, iBio allegedly was looking for scientists who
would, under iBio’s direction, develop such technology and “a commercially
viable, cost-effective, reliable, scalable process that would make a consistent
product.”5 As a result, iBio allegedly engaged Fraunhofer in 2003 to perform that
work through the Center.6
2. The parties’ commercial relationship yields new
technologies
The Complaint alleges that Fraunhofer was a “captive contractor” for iBio.7
Specifically, iBio claims that it provided and facilitated tens of millions of dollars
4
Id. ¶ 18.
5
Id.
6
Id. ¶ 19.
7
Id. ¶ 21.
3
in funding as well as technical direction and assistance for Fraunhofer to engage in
full-time development work for iBio.8 iBio allegedly entered this relationship with
the goal of having Fraunhofer develop the plant-based biopharmaceutical
technology for iBio’s exclusive ownership.9
The parties’ relationship is governed by a series of agreements. All told,
iBio and Fraunhofer entered into at least twenty-seven agreements—including
supplemental agreements, addendums, and amendments—between 2003 and 2014
(the “Agreements”).10 The most relevant of those Agreements, for purposes of this
action, are as follows: the Technology Transfer Agreement, effective January 1,
2004 (the “TTA”)11; Research Agreement #1, effective October 15, 2004
8
Id.
9
Id.
10
Pl.’s Opening Br. App. at A1-279, B1-5; see also Oral Arg. Tr. 60 (“There were
eight major agreements between these parties that had upwards of 72 supplements
and amendments over time on things unrelated to our present controversy.”).
Although some of the Agreements name parties other than iBio and Fraunhofer—
excluding the applicable third-parties in the non-bilateral Agreements—iBio and
Fraunhofer appear to be operating under the assumption that those entities are
either related or predecessor entities such that iBio and Fraunhofer are bound
under each Agreement. See, e.g., Def.’s Answering Br. 10-11 (noting that
Fraunhofer’s counterparty in the TTA—NuCycle Therapy, Inc.—is iBio’s
predecessor). Thus, because it is undisputed that iBio and Fraunhofer are bound
by each of the Agreements, I accept that as a stipulated fact.
11
Pl.’s Opening Br. App. at A1-12 (“TTA”).
4
(“Research Agreement #1”)12; Research Agreement #2, effective June 1, 2006
(“Research Agreement #2”)13; the Fourth Amendment of the TTA, effective
August 20, 2007 (the “Fourth Amendment”)14; the Fifth Amendment of the TTA,
effective December 17, 2007 (the “Fifth Amendment”)15; the Sixth Amendment of
the TTA, effective September 17, 2008 (the “Sixth Amendment”)16; the Transfer
and License Agreement, effective November 3, 2008 (the “TLA”)17; the Global
Access Agreement, effective February 11, 2010 (the “GAA”)18; the Research
Services Agreement, effective December 31, 2010 (the “RSA”)19; the trilateral
Collaboration Agreement between the parties and the Health Ministry of Brazil,
effective January 4, 2011 (the “Collaboration Agreement”)20; the trilateral Material
Transfer Agreement between the parties and Novici Biotech LLC, effective
12
Id. at A13-18 (“Research Agreement #1”).
13
Id. at A39-42 (“Research Agreement #2”).
14
Id. at A51-54 (“Fourth Amendment”).
15
Id. at A55-56 (“Fifth Amendment”).
16
Id. at A57-58 (“Sixth Amendment”).
17
Id. at A59-71 (“TLA”).
18
Id. at A72-81 (“GAA”).
19
Id. at A82-107 (“RSA”).
20
Id. at A108-34 (“Collaboration Agreement”).
5
September 29, 2011 (the “MTA”)21; the Master Services Agreement, effective
June 3, 2013 (the “MSA”)22; the Terms of Settlement for the Seventh Amendment
of the TTA, effective June 30, 2013 (the “Terms of Settlement”)23; and the
Confirmatory Assignment, effective July 2, 2013 (the “Confirmatory
Assignment”).24
By the end of 2014, the parties’ partnership had yielded at least twenty-four
U.S. patents granted or applied for and sixty foreign patents granted or applied for.
The parties also allegedly developed valuable unpatented aspects of the
technology, including “extensive confidential data and other know-how,” such as
“the design and operation of prototype and pilot plants, information and expertise
related to the manufacturing process with all its parameters, conditions, equipment,
specifications, and standard operating procedures and information about what
works and what does not work to improve protein yield and purity.” 25
21
Def.’s Answering Br., Ex. 11 (“MTA”).
22
Pl.’s Opening Br. App. at A243-52 (“MSA”).
23
Id. at A253-55 (“Terms of Settlement”).
24
Id. at B1-5 (“Confirmatory Assignment”).
25
Compl. ¶ 31.
6
3. A dispute arises between the parties regarding Fraunhofer’s
interactions with a third-party competitor of iBio’s
In 2013, Fraunhofer entered into an agreement with PlantForm Corporation
(“PlantForm”), a Canadian biotech company and a competitor of iBio.26 That
agreement allegedly required Fraunhofer to develop plant-made pharmaceuticals
for PlantForm in violation of Fraunhofer’s agreements with iBio, which, iBio
avers, bound Fraunhofer to act exclusively for iBio in that field.27 Fraunhofer also
allegedly agreed to use iBio’s technology in the performance of its duties for
Plantform and to disclose and transfer iBio’s proprietary information and
intellectual property to PlantForm.28
C. Procedural History
On October 17, 2014, iBio filed its initial complaint in this action against
PlantForm and its President and CEO, Don Stewart, for tortious interference with
contract, trade secret misappropriation, and unjust enrichment. On December 19,
2014, iBio filed an amended complaint against PlantForm and Stewart. In addition
to the three original claims, that amended complaint included a fourth claim for
tortious interference with business relations. Those two complaints sought to
26
Id. ¶ 62.
27
Id. ¶¶ 61-64.
28
Id.
7
prohibit PlantForm and Stewart from utilizing the technology that allegedly
belonged to iBio and sought to compel PlantForm and Stewart to return that
technology to iBio. iBio also sought monetary damages against PlantForm and
Stewart.
On February 24, 2015, Fraunhofer moved to intervene in that action. iBio
did not oppose the motion. On March 17, 2015, iBio filed a complaint in a
separate action against Fraunhofer and its Executive Director, Vidadi Yusibov.
That complaint asserted claims against the defendants for breach of contract, trade
secret misappropriation, conversion, and violation of the Delaware Uniform
Deceptive Trade Practices Act. On April 9, 2015, Vice Chancellor Parsons
consolidated the two actions. iBio and PlantForm eventually settled their dispute
in August 2015, and PlantForm and Stewart were dismissed with prejudice. On
September 29, 2015, iBio filed its operative amended Complaint against
Fraunhofer, which left the claims largely unchanged but dismissed Yusibov as a
defendant. In the Complaint, iBio seeks the following:
(i) a declaration that iBio is the exclusive owner of all
rights in the developed technology and that Fraunhofer
has no ownership rights in the developed technology; (ii)
a declaration that iBio is entitled to immediate transfer of
the technology and an accompanying order of specific
performance requiring Fraunhofer to confirm transfer of
title to all developed technology and to facilitate the
transfer of all information concerning the technology to
iBio; (iii) a declaration that Fraunhofer has no right to
use iBio’s technology except as expressly permitted in
8
the parties’ agreements and an accompanying injunction
against further unauthorized use; and (iv) monetary
damages for harm incurred as a result of Fraunhofer’s
failure to transfer the technology and unauthorized use of
the technology.29
The crux of the Complaint is that the agreements between the parties provide
that iBio exclusively owns all of the patented and unpatented aspects of the
technology and that Fraunhofer breached those agreements by refusing to transfer
and improperly using iBio’s technology in contravention of iBio’s proprietary
rights. As such, I bifurcated the action to resolve the following threshold question
(the “Threshold Question”) before proceeding with the rest of the case: “What is
the scope of the technology in Fraunhofer’s possession -- under all of the relevant
agreements between the parties -- to which iBio has ownership rights and to which
iBio is entitled to receive a transfer from Fraunhofer?”30 The parties subsequently
agreed to that approach31 and submitted briefs supporting their competing
interpretations of the Agreements. I then held oral argument on the Threshold
29
Compl. ¶ 14.
30
iBio, Inc. v. Fraunhofer USA, Inc., C.A. No. 10256-VCMR, at 7-8 (Del. Ch. Jan.
6, 2016) (TRANSCRIPT).
31
On January 14, 2016, the parties submitted a joint stipulation “agree[ing] with the
procedure suggested by the Court.” Stipulation and [Proposed] Order Regarding
Briefing of the Threshold Question, Docket Item No. 136, at 1.
9
Question on April 29, 2016. This Memorandum Opinion contains my ruling on the
Threshold Question.
D. Parties’ Contentions
According to iBio, the TTA, the Fourth Amendment, and the TLA “contain
the most comprehensive and detailed descriptions of rights in the technology.”32
iBio contends that those three Agreements demonstrate that the parties intended
that iBio be granted exclusive ownership of all technology that Fraunhofer
developed pursuant to the Agreements and required Fraunhofer to execute a
transfer to iBio of that technology. iBio also highlights the “operative provisions”
in certain of the other Agreements which “reaffirm the broad scope of iBio’s rights
under the TTA and TLA.”33 Finally, iBio argues that neither the Terms of
Settlement nor the Confirmatory Assignment limited or waived any of iBio’s
ownership rights over the technology. As such, iBio proposes that the Threshold
Question be answered as follows:
The scope of iBio’s ownership rights to technology and
rights to receive transfer of technology, pursuant to its
agreements with Fraunhofer: (1) encompasses all
proprietary rights of any kind to technology in the area of
plant-based manufacturing technologies, techniques and
methodologies and associated improvements, whether for
the expression of vaccines and therapeutic proteins or
32
Pl.’s Opening Br. 5.
33
Id. at 5, 13-21.
10
otherwise, whether previously owned by Fraunhofer,
developed for iBio pursuant to the TTA, or otherwise; (2)
is not limited to the 49 United States patents and patent
applications listed in the 2013 Confirmatory Assignment;
and (3) includes know-how.34
Fraunhofer, on the other hand, contends that iBio, in its Complaint, waived
its claims to proprietary technology that was “developed by [Fraunhofer] for iBio
pursuant to the TTA . . . in a defined field that excluded genetically-modified
plants.”35 iBio discovery responses also purportedly “confirmed . . . that the
disputed technology is limited to alleged proprietary know-how that does not rise
to the level of a statutory trade secret.”36 In addition, Fraunhofer interprets the
Agreements more narrowly than iBio. According to Fraunhofer, iBio only is
entitled to specifically enumerated patents and patent applications rather than all
the “know-how” and other peripheral intellectual property to which iBio claims a
right. Fraunhofer highlights the Terms of Settlement and the Confirmatory
Assignment as evidence that iBio released all claims beyond those forty-nine
patent and patent applications. Finally, and in the alternative, Fraunhofer contends
34
Id. at 32.
35
Def.’s Answering Br. 1.
36
Id.
11
that iBio’s right to receive a technology transfer from Fraunhofer is conditioned on
certain “financial and other contract obligations” that iBio never fulfilled.37
II. ANALYSIS
A. Legal Standard
Resolution of the Threshold Question requires me to interpret the relevant
Agreements’ operative provisions to determine iBio’s rights thereunder. “The
proper construction of any contract . . . is purely a question of law.”38 “When
interpreting a contract, the court’s role is to effectuate the parties’ intent based on
the parties’ words and the plain meaning of those words.”39 “Clear and
unambiguous language . . . should be given its ordinary and usual meaning.” 40
“Contractual interpretation operates under the assumption that the parties never
include superfluous verbiage in their agreement, and that each word should be
given meaning and effect by the court.”41 Thus, “‘[i]n upholding the intentions of
37
Id.
38
Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195
(Del. 1992).
39
Zimmerman v. Crothall, 62 A.3d 676, 690 (Del. Ch. 2013) (citing Lorillard
Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006)).
40
Lorillard Tobacco, 903 A.2d at 739 (quoting Rhone-Poulenc, 616 A.2d at 1195-
96).
41
NAMA Hldgs., LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch.
2007), aff’d, 945 A.2d 594 (Del. 2008).
12
the parties, a court must construe the agreement as a whole, giving effect to all
provisions therein.’ The meaning inferred from a particular provision cannot
control the meaning of the entire agreement if such an inference conflicts with the
agreement’s overall scheme or plan.”42
“If a contract is unambiguous, extrinsic evidence may not be used to
interpret the intent of the parties, to vary the terms of the contract or to create an
ambiguity.”43 If a contract is ambiguous, however, a court may consider extrinsic
evidence, including “evidence of prior agreements and communications of the
parties as well as trade usage or course of dealing.”44 “Contract language is not
ambiguous simply because the parties disagree on its meaning.”45 “Rather, a
contract is ambiguous only when the provisions in controversy are reasonably or
fairly susceptible of different interpretations or may have two or more different
meanings.”46
42
GMG Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del.
2012) (quoting E.I. du Pont de Nemours and Co., Inc. v. Shell Oil Co., 498 A.2d
1108, 1113 (Del. 1985)).
43
Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del.
1997).
44
Id. at 1233.
45
E.I. du Pont de Nemours & Co., Inc. v. Allstate Ins. Co., 693 A.2d 1059, 1061
(Del. 1997).
46
Rhone-Poulenc, 616 A.2d at 1196.
13
B. The Agreements Entitle iBio to Broad Ownership Rights over the
Technology
1. The Unamended TTA supports Fraunhofer’s interpretation
of the Agreements
The TTA is the first of the Agreements. The TTA, therefore, describes the
initial framework of the parties’ relationship. As implied by its name, the TTA
contemplates an eventual transfer of certain technology from Fraunhofer to iBio.
“Fraunhofer was to be the owner of the technology being developed and iBio was
to be the exclusive licensee until November 2008, when iBio would have the
option to make a ‘Title Payment’ and thereupon become the owner of the
technology.”47
The TTA’s framework is set out at a high level in the TTA’s Recitals.48 In
its First Recital, the TTA states as follows:
Fraunhofer owns and will endeavor to develop certain
exclusive rights to the proprietary technology and
intellectual property specifically described in Appendix
A (the “Technology”) in the area of expression,
engineering, testing, production and validation of human
vaccines, human antibodies and human therapeutic
proteins in plants (the “Field”); The Field does not
47
Pl.’s Opening Br. 5-6 (citing TTA §§ 2.1, 3.3).
48
Although the Court generally looks to an agreement’s recitals when the operative
provisions are ambiguous, see Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 822-
23 (Del. 1992), “recitals [that] appear to include substantive, definitional language
that is consistent with the” agreement’s other provisions “should not be ignored.”
UtiliSave, LLC v. Miele, 2015 WL 5458960, at *7 (Del. Ch. Sept. 17, 2015).
14
include industrial biocatalysis, veterinary applications,
diagnostic applications, both human and other,
agricultural and environmental applications . . . .49
That Recital is relevant not only because it informs the Court as to the default
position at which the parties began when their relationship first started, but also
because it defines two terms—“Technology” and “Field”—which are important to
this dispute and defined in varying ways throughout the Agreements. The TTA’s
Second Recital describes the ultimate technology transfer that the parties
anticipate, stating that “[iBio] desires to acquire the Technology, subject to the
retention of certain rights in the Technology by Fraunhofer, in the Field in
accordance with the terms and conditions of this Agreement.”50
The mechanisms that effectuate the TTA’s framework are laid out in detail
in Sections 2.1 and 3.3. Section 2.1(a) provides that “Fraunhofer grants to [iBio]
an exclusive license to use and to develop products derived from or incorporating
the Technology in the Field.”51 Section 3.3 requires iBio to pay Fraunhofer the
“Title Payment” of $250,000 on November 2, 2008 in exchange for “full title to
the Technology and Improvements,” in addition to other “Additional Payments”
49
TTA, First Recital.
50
Id., Second Recital.
51
Id. § 2.1(a).
15
that iBio is obligated to make after the technology transfer.52 And, although the
TTA grants iBio title to the Technology and Improvements upon making the Title
Payment, Section 2.1(b) reserves for Fraunhofer “a perpetual, world-wide, royalty-
free license to . . . (i) perform research utilizing the Technology or Improvements,
in any field, on a non-exclusive basis; and (ii) commercialize the Technology and
Improvements for application outside of the Field on an exclusive basis.”53
Finally, Appendix A to the TTA, titled “Licensed Technology,” begins with
an introductory clause: “[t]he following patent applications filed by Fraunhofer
prior to the effective date of this Agreement and license rights held by Fraunhofer
on the date of this Agreement, to the extent the intellectual property described
therein applies to the Field.”54 Appendix A then lists the five relevant patent
applications that Fraunhofer presumably had pending at the time, the license rights
to peptide technology that Fraunhofer held on that date, and “[a]ll patent
applications claiming inventions in the Field filed by Fraunhofer . . . between the
date of this Agreement and December 31, 2008, to the extent the intellectual
property described therein applies to the Field.”55
52
Id. § 3.3.
53
Id. § 2.1(b).
54
Id., App. A.
55
Id.
16
Standing alone, therefore, the TTA appears to favor Fraunhofer’s
interpretation of the scope of the Technology. Upon making the Title Payment,
iBio was entitled to Technology and Improvements. Appendix A, which is
incorporated by reference into the definition of Technology, includes only current
and future patent applications and license rights. Section 6.1 defines
“Improvements” as “all modifications, revisions, additions, customizations and
enhancements” made by Fraunhofer to the Technology. 56 Those definitions do not
include iBio’s broader claims of intellectual property rights, such as know-how.
I note, however, that Section 6.2 obligates Fraunhofer to protect its
“Intellectual Property Rights in the Technology and . . . Improvements in the
Field.”57 Section 6.2 subsequently defines “Intellectual Property Rights” as
follows:
[A]ny and all proprietary rights provided under: (i) patent
law; (ii) copyright law; (iii) trademark law; (iv) design
patent or industrial design law; or (v) any other statutory
provision or common law principle applicable to this
Agreement, including trade secret law, which may
provide a right in either ideas, formulae, algorithms,
concepts, inventions or know-how generally, or the
expression or use of such ideas, formulae, algorithms,
concepts, inventions or know-how.58
56
Id. § 6.1.
57
Id. § 6.2.
58
Id.
17
This Section can be interpreted in two conflicting ways.
The fact that the TTA required Fraunhofer to protect those Intellectual
Property Rights may imply that the parties intended that iBio receive the benefit of
those Rights, either through the ultimate technology transfer or through some
other, more informal method. Alternatively, the fact that Intellectual Property
Rights were not included along with Technology and Improvements in the
technology transfer, despite being defined explicitly in the TTA, may indicate that
the parties intended the Intellectual Property Rights not be transferred from
Fraunhofer to iBio.59 Because the second of these two contrary interpretations of
Section 6.2 is more reasonable, I conclude that the TTA favors Fraunhofer’s
interpretation of the Agreements.60 Although the parties’ competing, reasonable
interpretations of the TTA may indicate ambiguity, I need not resort to extraneous
evidence because the Fourth Amendment eliminates that ambiguity in iBio’s favor.
59
See Active Asset Recovery, Inc. v. Real Estate Asset Recovery Servs., Inc., 1999
WL 743479, at *11 (Del. Ch. Sept. 10, 1999) (citing ARTHUR L. CORBIN, 3
CORBIN ON CONTRACTS § 552 at 206 (1906) (“If one subject is specifically named,
or if several subjects of a larger class are specifically enumerated, and there are no
general words to show that other subjects of that class are included, it may
reasonably be inferred that the subjects not specifically named were intended to be
excluded.”)) (applying the rule expressio unius est exclusio alterius in the contract
interpretation context).
60
But see Oral Arg. Tr. 67 (“THE COURT: . . . Does the fact that Section 6.2 of [the
TTA] obligate[s] Fraunhofer to maintain and protect intellectual property rights
imply that those rights were going to be transferred to iBio? [Fraunhofer’s
Counsel]: They might be, yes. . . . Yeah, I think that’s fair.”).
18
2. The Fourth Amendment supports iBio’s interpretation of
the Agreements
The TTA cannot be interpreted on a standalone basis because it has been
supplemented and amended numerous times. Notably, the parties entered into the
Fourth Amendment to extend Fraunhofer’s obligation to continue developing
technology through the end of 2014.61 The Fourth Amendment also appears to
expand the scope of the technology transfer. Section 1 confirms that iBio is
entitled to receive “full title to the Technology and Improvements with exclusive
rights in the Field upon making the November 2008 Title Payment.62 Section 1
also provides, in relevant part, that Fraunhofer “will continue until December 31,
2009 to enhance the Technology and Intellectual Property related to the
Technology and Improvements for [iBio] and formally to transfer and convey
rights thereto to [iBio] as and when requested by [iBio].”63
Further, Section 2 states as follows:
“During the five (5) year period commencing January 1,
2010 . . . and ending December 31, 2014, Fraunhofer
shall (i) further develop exclusively for and transfer to
[iBio] rights to proprietary technology and Intellectual
Property Rights (the “Technology”) in the area of
expression, engineering, testing, production and
61
Fourth Amendment §§ 2, 6.
62
Id. § 1.
63
Id. (emphasis added).
19
validation of human vaccines, human antibodies and
human therapeutic proteins in plants, veterinary
applications of plant-based influenza vaccines, including
commercial process and production techniques and
methodologies related to those applications; (ii) facilitate
technology transfer and implementation by or for [iBio];
and (iii) provide access to Fraunhofer personnel and
facilities, as appropriate, to support [iBio] efforts to
commercialize the Technology.64
Similar to the TTA, the Fourth Amendment confirms that “Fraunhofer reserves the
rights to the commercial process and production techniques and methodologies for
applications outside of the Field.”65 Finally, Section 10 states that “[u]nless
otherwise provided in this Amendment . . . the defined terms shall have the
meanings attributed to them” in the TTA.66
The Fourth Amendment, therefore, appears to have amended the term
“Technology,” and, consequently, the scope of the technology to be transferred
from Fraunhofer to iBio. As I observed above, the TTA only entitles iBio to a
transfer of Technology and Improvements. The TTA also excludes Intellectual
Property Rights from the definition of Technology. Under the Fourth Amendment,
however, the definition of Technology includes Intellectual Property Rights. And,
because Intellectual Property Rights are not defined in the Fourth Amendment, the
64
Id. § 2.
65
Id.
66
Id. § 10.
20
TTA’s definition of that term controls. Thus, it appears that both the technology
transfer that iBio is entitled to upon making the Title Payment67 and the additional
Technology that Fraunhofer developed for iBio through December 31, 201468
include Intellectual Property Rights.69 Because Intellectual Property Rights are
defined broadly in the TTA,70 I conclude that the TTA, as amended by the Fourth
Amendment, supports iBio’s interpretation of the Agreements.
3. The TLA supports iBio’s interpretation of the Agreements
The TLA is the most hotly debated of the Agreements. iBio made the Title
Payment, and the parties executed the TLA to effectuate the title conveyance
contemplated by the TTA as of November 3, 2008. The TLA’s Fifth Recital states
as follows:
[T]he Parties now desire to enter into this Agreement by
which (i) Fraunhofer shall transfer to [iBio], full title to
the Technology and Improvements (as defined below);
and (ii) [iBio] shall grant Fraunhofer a license to use such
proprietary technology and intellectual property rights on
a non-exclusive basis solely for research purposes and an
67
See Fourth Amendment § 1; TTA §§ 2.1, 3.3.
68
See Fourth Amendment §§ 2, 6.
69
Section 1 of the Fourth Amendment refers to Intellectual Property rather than
Intellectual Property Rights. Id. § 1. Neither the TTA nor the Fourth Amendment
defines “Intellectual Property.” That said, the inclusion of this term does not
impact my analysis because Section 1 also include Technology, which the Fourth
Amendment appears to have amended to include Intellectual Property Rights.
70
See supra text accompanying note 58.
21
exclusive license to commercialize such proprietary
technology and intellectual property rights outside of the
Field (as defined below).71
“Technology” is defined as “the technology and Intellectual Property Rights (i)
described in the patents and applications identified or (ii) otherwise referred to in
the attached Appendix A.”72 “Improvements” is defined as “all modifications,
revisions, additions, customizations and enhancements to the Technology,
including all Intellectual Property Rights related thereto.”73 The term “Field”
includes “the area of expression, engineering, testing, production and validation of
human vaccines, human antibodies, human therapeutics, influenza vaccine antigens
for veterinary use, and antibodies for influenza diagnostics produced in plants,
including commercial process and production techniques and methodologies
related to those applications” and excludes “industrial biocatalysis, reagent
applications, veterinary applications, diagnostic applications, both human and
other, agricultural and environmental applications, except as otherwise specifically
71
TLA, Fifth Recital.
72
Id. § 1.13.
73
Id. § 1.4.
22
provided” in the TLA.74 And, the TLA’s definition of “Intellectual Property
Rights” is identical to that term’s definition in the TTA.75
a. Sections 2.1 and 8.1 and Appendix A to the TLA
The parties base their competing interpretations of the TLA on three main
provisions. The first of those provisions is Section 2.1, which states, in relevant
part, that “Fraunhofer hereby assigns, transfers and delivers to [iBio] . . . all right,
title and interest in and to the Technology and Improvements including the
Intellectual Property Rights developed in connection with the Research
Agreements.”76 The “Research Agreements” include Research Agreement #1 and
Research Agreement #2. The parties entered into those Research Agreements to
define the parameters of discrete projects that Fraunhofer performed on iBio’s
behalf. Because both of the Research Agreements explicitly acknowledge that the
technology developed pursuant to those Agreements fall within the scope of the
TTA and shall be transferred to iBio under the TTA,77 they can be viewed as
supplemental to the TTA.
74
Id. § 1.3.
75
Compare id. § 1.5, with TTA § 6.2.
76
TLA § 2.1.
77
Research Agreement #1 § 2 (“[T]he parties hereby acknowledge that any
intellectual property in the area of expression, engineering, testing, production and
validation of human vaccines, human antibodies and human therapeutic proteins in
23
The second relevant provision is Section 8.1. Under Section 8.1, “[a]ll right,
title and interest in and to the Technology and Improvements, including the
Intellectual Property Rights relating thereto, shall be and remain the sole and
complete property of [iBio].”78 Section 8.1 also provides that “Fraunhofer
recognizes and acknowledges [iBio’s] exclusive ownership of the Technology and
Improvements, including all the Intellectual Property Rights relating thereto” and
requires Fraunhofer to “execute such additional documents as may be necessary to
perfect [iBio’s] ownership of such rights.”79
The third and final provision is Appendix A to the TLA. Appendix A,
which is incorporated by reference into the definition of Technology, includes the
following introductory paragraph:
All technology and intellectual property in the area of
plant-based manufacturing technologies, techniques and
methodologies and associated improvements, whether for
the expression of vaccines and therapeutic proteins or
otherwise, whether previously developed or owned by
plants owned or controlled by Fraunhofer, and/or arising out of the work described
in this Agreement, falls within the scope of the [TTA]. Fraunhofer shall and
hereby does transfer all of the relevant rights to its inventions pursuant to that
[TTA].”); Research Agreement #2 § 5 (“All of the Technology and Improvements
created pursuant to the Prior Agreements (as modified and supplemented by this
agreement) shall be included in the transfer or licensing of Technology and
Improvements described in Section 3.3 of the [TTA].”).
78
Id. § 8.1.
79
Id.
24
[Fraunhofer], developed for [iBio] pursuant to the TTA,
or otherwise, including, but not limited to the following
patent applications and license rights held by
[Fraunhofer] on the date of the [TTA].80
That paragraph is followed by the same patent applications and license rights that
are included in Appendix A to the TTA. Appendix A to the TLA concludes with
the following two sentences:
All patent applications filed by [Fraunhofer] with regard
to work product developed by [Fraunhofer] at any time
under the TTA. Technology shall not include any
intellectual property that is developed in whole or in part
by the Fraunhofer Institute for Molecular Biology and
Applied Ecology, which is headquartered in Aachen,
Germany.81
Based on Sections 2.1 and 8.1 and Appendix A, Fraunhofer contends that the
TLA only conveyed to iBio ownership of the patent applications and the license
rights enumerated in Appendix A and the thirty-four patent applications that
Fraunhofer had filed by November 2008 under the TTA.82 iBio, on the other hand,
interprets those provisions as entitling it to “all proprietary rights of any kind
developed by Fraunhofer ‘in the area of plant-based manufacturing technologies,
techniques and methodologies and associated improvements, whether for the
80
Id., App. A.
81
Id.
82
Def.’s Answering Br. 15-16.
25
expression of vaccines and therapeutic proteins or otherwise, whether previously
developed or owned by [Fraunhofer], developed for [iBio] or otherwise.’”83 The
parties agree that Section 2.1 is the operative provision that effectuates the TLA’s
title conveyance. And, the parties agree that the scope of the technology conveyed
via Section 2.1 should be determined by reference to Appendix A. Their
disagreement, therefore, hinges on the proper construction of Appendix A’s
introductory clause.84
According to Fraunhofer, the general statement in the opening paragraph of
Appendix A is limited by the more specific, subsequent references in that
Appendix. Although that opening paragraph indicates that iBio is entitled to “[a]ll
technology and intellectual property,”85 Fraunhofer points out that the definition of
Technology is limited to patents, patent applications, and Intellectual Property
Rights.86 Because the phrase “[a]ll technology and intellectual property” does not
identify or reference any patents, patent applications, or “proprietary rights under
patent, copyright, trademark, design patent, or industrial law, or under any other
statutory or common law principle,” Fraunhofer contends that Appendix A’s
83
Pl.’s Opening Br. 9 (quoting TLA, App. A).
84
Def.’s Answering Br. 15-18; Pl.’s Reply Br. 4-7.
85
TLA, App. A.
86
Def.’s Answering Br. 16 (citing TLA § 1.13).
26
introductory clause should be ignored in favor of that Appendix’s enumerated
patent applications, license rights, and reference to the “patent applications filed by
[Fraunhofer] with regard to work product developed by [Fraunhofer] at any time
under the TTA.”87
In addition, Fraunhofer denies that the final phrase in Appendix A’s opening
clause—stating that the Technology “includ[es] but [is] not limited to the
following [enumerated] patent applications and license rights”88—indicates “that
the technology and intellectual property that follows is not a complete list of what
was assigned to iBio.”89 Rather, Fraunhofer reads that phrase simply as
differentiating between the “five patent applications and one set of license rights
held by [Fraunhofer] on December 18, 2003”—i.e., the date the parties entered into
the TTA—and the patent applications that Fraunhofer filed based on work
developed under the TTA, which “were clearly not held by [Fraunhofer] on the
date of the original TTA, and thus fall outside the scope of the ‘including but not
limited to’ clause.”90
87
Id. at 16-17 (quoting TLA, App. A) (emphasis omitted).
88
TLA, App. A.
89
Def.’s Answering Br. 17.
90
Id. at 17-18 (quoting TLA, App. A).
27
Fraunhofer’s reading of the TLA is flawed. As an initial matter, Fraunhofer
strains the bounds of reasonableness to convince the Court that it should disregard
the bulk of Appendix A’s opening paragraph. Fraunhofer’s position appears to be
based on its view that the TLA’s definition of Technology is limited to “patents
and applications” and “Intellectual Property Rights.”91 Not so. The TLA states
that “‘Technology’ shall include the technology and Intellectual Property Rights (i)
described in the patents and applications identified or (ii) otherwise referred to in
the attached Appendix A.”92 Accepting Fraunhofer’s interpretation of that
provision would require the Court to ignore the word “technology,” which is an
undefined term that implies that Technology includes more than Intellectual
Property Rights and patents and applications. The Court also would be forced to
ignore the presence of romanettes (i) and (ii), which indicate that the “technology
and Intellectual Property Rights . . . described in the patents and applications
identified” is a category of Technology separate from the “technology and
Intellectual Property Rights . . . otherwise referred to in the attached Appendix A”
rather than a modifier that limits the phrase “otherwise referred to in the attached
Appendix A” to “patents and applications.”93
91
TLA § 1.13.
92
Id.
93
Id.
28
Based on this construction, the five patent applications enumerated in
Appendix A constitute “patents and applications identified.”94 The license rights
and the patent applications filed based on Fraunhofer’s development work pursuant
to the TTA constitute “technology and Intellectual Property Rights . . . otherwise
referred to in the attached Appendix A.”95 And, Appendix A’s initial clause—
“[a]ll technology and intellectual property in the area of plant-based manufacturing
technologies, techniques and methodologies and associated improvements, whether
for the expression of vaccines and therapeutic proteins or otherwise, whether
previously developed or owned by [Fruanhofer], developed for [iBio] pursuant to
the TTA, or otherwise”96—certainly also constitutes “technology and Intellectual
Property Rights . . . otherwise referred to in the attached Appendix A.”97 Appendix
A’s “including, but not limited to” language, therefore, extends beyond the patent
applications that Fraunhofer filed pursuant to its development work under the
TTA. Fraunhofer’s alternative interpretation is disfavored because it would render
Appendix A’s opening clause superfluous.98
94
Id.
95
Id.
96
Id., App. A.
97
Id. § 1.13.
98
NAMA Hldgs., 948 A.2d at 419.
29
Further, iBio’s interpretation of Appendix A is supported by Section 8.1 of
the TLA. That Section—which Fraunhofer does not address in its brief—indicates
that iBio owns “the Technology and Improvements, including the Intellectual
Property Rights relating thereto.”99 The TLA’s definition of Intellectual Property
Rights is broad and includes “any and all proprietary rights provided under: (i)
patent law; (ii) copyright law; (iii) trademark law; (iv) design patent or industrial
law; or (v) any other statutory provision or common law principle applicable to
[the TLA].”100 Under Section 8.1, therefore, Fraunhofer acknowledges and agrees
to “execute such additional documents as may be necessary to perfect” iBio’s
ownership of Intellectual Property Rights.101 Fraunhofer, however, insists that the
intellectual property TLA conveyed to iBio included only the patent applications
and the license rights enumerated in Appendix A and the thirty-four patent
applications that Fraunhofer had filed by November 2008 under the TTA. 102 In
fact, Fraunhofer expressly denies that iBio is entitled to any “proprietary rights
under patent, copyright, trademark, design patent, or industrial law, or under any
other statutory or common law principle” because Appendix A does not make
99
TLA § 8.1.
100
Id. § 1.5.
101
Id. § 8.1.
102
Def.’s Answering Br. 15-16.
30
explicit reference to any such rights.103 Thus, while Fraunhofer’s construction of
the TLA would contradict Section 8.1, iBio’s interpretation comports with it.104 As
a result, I conclude that Sections 2.1 and 8.1 and Appendix A all support iBio’s
interpretation of the Agreements.
b. Fraunhofer’s other arguments
Fraunhofer makes four additional arguments in opposition to iBio’s
interpretation of the TLA. First, Fraunhofer points out that the scope of the
technology conveyed to iBio in the TLA is narrower than the technology licensed
to iBio in the TTA. Specifically, Fraunhofer highlights the fact that the second to
last paragraph of Appendix A to the TTA includes “‘[a]ll patent applications
claiming inventions in the Field’ filed by [Fraunhofer] between the date of the
TTA and December 31, 2008,”105 whereas the last paragraph of Appendix A to the
TLA includes “‘[a]ll patent applications filed by [Fraunhofer] with regard to work
product developed by [Fraunhofer] at any time under the TTA.’”106 According to
Fraunhofer, therefore, “[i]t simply makes no sense that when the parties plainly
103
Def.’s Answering Br. 16-17 (emphasis omitted).
104
See GMG Capital Invs., LLC, 36 A.3d at 779 (“In upholding the intentions of the
parties, a court must construe the agreement as a whole, giving effect to all
provisions therein.” (quoting E.I. du Pont de Nemours and Co., Inc., 498 A.2d at
1113)).
105
Def.’s Answering Br. 19 (quoting TTA, App. A).
106
Id. (quoting TLA, App. A).
31
narrowed the scope of the Technology conveyed, they also . . . expanded it to all
plant-based technology and intellectual property.”107
In reality, it is Fraunhofer’s argument that “makes no sense.” Under the
transitive property of equality,108 because (1) Appendix A to the TLA includes all
patent applications that Fraunhofer filed under the TTA, and (2) because Appendix
A to the TTA includes all patent applications filed in the Field, then (3) Appendix
A to the TLA necessarily includes all patent applications filed in the Field. It is
unreasonable, therefore, to interpret the TLA as narrower than the TTA. Further,
Fraunhofer’s argument, taken as true, actually lends additional credence to iBio’s
interpretation of Appendix A to the TLA. The TLA was intended to effectuate the
title conveyance contemplated by the TTA. Fraunhofer contends that the phrase
“patent applications filed . . . under the TTA”109 excludes certain “patent
applications claiming inventions in the Field,”110 making the TLA narrower than
the TTA. If that is true, then it makes more sense to interpret the opening
paragraph in Appendix A to the TLA as extending iBio’s ownership rights beyond
the patent applications and the license rights enumerated in Appendix A and the
107
Def.’s Answering Br. 19.
108
Under the transitive property of equality, if a=b and b=c, then a=c.
109
TLA, App. A (emphasis added).
110
TTA, App. A (emphasis added).
32
thirty-four patent applications that Fraunhofer had filed by November 2008 under
the TTA. Otherwise, the TLA’s stated intent of effectuating the TTA’s title
conveyance would fail, as certain patent applications claiming inventions in the
Field would be excluded from that conveyance.
Second, Fraunhofer highlights Section 9.2 of the TLA, which provides, in
relevant part, as follows:
Fraunhofer further represents, warrants and covenants to
[iBio], and acknowledges that [iBio] has relied upon the
completeness and accuracy of such representations,
warranties and covenants in entering into this Agreement,
that . . . during the period from January 1, 2004 through
November 2, 2008, Fraunhofer has not created any
Technology, Improvements or related Intellectual
Property Rights other than those being assigned to [iBio]
pursuant to this Agreement . . . .111
According to Fraunhofer, iBio’s interpretation of the TLA would render Section
9.2 superfluous because “[i]f, as iBio says, the Technology and Improvements
assigned under the TLA consisted of ‘all technology and intellectual property in
the area of plant-based manufacturing,’ there could logically be no ‘other’
Technology and Improvements that were not assigned to iBio.”112 I disagree.
Although Section 9.2 may be somewhat redundant, its language is not
superfluous to the extent that it provides iBio with additional comfort “that
111
TLA § 9.2.
112
Def.’s Answering Br. 20.
33
Fraunhofer had developed technology exclusively for iBio, and that everything
developed was being transferred to iBio, not given to others or secretly retained by
Fraunhofer for its own use.”113 Fraunhofer also ignores that regardless of whether
the Court interprets the TLA’s other provisions in Fraunhofer’s or iBio’s favor,
their argument that Section 9.2 is superfluous applies with equal force. In other
words, Section 9.2 provides that the “Technology and Improvements” only
includes that which is being conveyed to iBio under the TLA, no matter the scope
of the “Technology and Improvements.” Section 9.2, therefore, does not bear on
either party’s interpretation of the TLA.
Third, Fraunhofer posits that three policy considerations counsel against
iBio’s broad interpretation of the TLA: (1) “[g]eneralized statements of intellectual
property rights” do not provide “reasonable notice to the contracting parties, the
public, and ultimately the courts, who are asked to determine and enforce
intellectual property rights”114; (2) “broad, sweeping statements can be anti-
competitive and an unlawful restraint on trade”115; and (3) “courts will not uphold
113
Pl.’s Reply Br. 8.
114
Def.’s Answering Br. 20 (citing Pellerin v. Honeywell Int’l, Inc., 877 F. Supp. 2d
983, 990-91 (S.D. Cal. 2012); Schwan’s Consumer Brands N. Am., Inc. v. Home
Run Inn, Inc., 2005 WL 3434376, at*5 (D. Minn. Dec. 9, 2005)).
115
Id. at 21 (citing Vigoro Indus., Inc. v. Crisp, 82 F.3d 785, 790 (8th Cir. 1996)).
34
agreements purporting to transfer or restrict knowledge in the public domain, as
such agreements would impermissibly infringe on the free flow of information.”116
As an initial matter, the cases that Fraunhofer cites are inapposite. Those
decisions simply do not involve the contractual interpretation of agreements
providing for the transfer of intellectual property rights. Further, the policies that
Fraunhofer identified are not implicated by iBio’s interpretation of the TLA
because the parties are sophisticated commercial actors that agreed to a reasonably
precise description of the scope of the technology at issue. Just because all of the
technology conveyed to iBio is not enumerated in the TLA does not render that
Agreement vague or overly broad. And, the TLA only conveys to iBio ownership
of intellectual property rights that are protected under relevant intellectual property
laws.117
Fourth and finally, Fraunhofer contends that the Court should reject iBio’s
interpretation of the TLA because it “would lead to a patently absurd result” that
“[n]o reasonable person would have expected . . . when executing the TLA.”118
116
Id. (citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 156
(1989)).
117
See TLA § 1.5 (limiting the TLA’s definition of “Intellectual Property Rights” to
“proprietary rights provided under” various bodies of intellectual property law).
118
Def.’s Answering Br. 22 (citing Finger Lakes Capital P’rs, LLC v. Honeoye Lake
Acq., LLC, 2015 WL 6455367, at *8 (Del. Ch. Oct. 26, 2015)).
35
Fraunhofer maintains that none of the Agreements that preceded the TLA entitled
iBio to the same, broad intellectual property rights to which iBio claims ownership
under the TLA. Yet, according to Fraunhofer, iBio’s required payments under the
TLA do not reflect the value of the technology that iBio seeks. As such,
Fraunhofer points out that “[i]f [it] had actually agreed to assign to iBio all rights
[Fraunhofer] had ever held or developed for anyone in all technology and
intellectual property in the area of plant-based manufacturing”—which may
preclude Fraunhofer from performing such services for any other party and force
the Center to shut down—then it would have sought equivalent compensation.119
Fraunhofer’s position, however, rests on one fatal premise: that iBio
interprets the TLA as expanding the scope of the relevant technology far beyond
what was contemplated by prior Agreements. On the contrary, the scope of the
technology described in the TLA is consistent with the TTA, as modified by the
Fourth Amendment. The Fourth Amendment entitles iBio to all “proprietary
technology and Intellectual Property Rights in the area of expression, engineering,
testing, production and validation of human vaccines, human antibodies and
human therapeutic proteins in plants, veterinary applications of plant-based
influenza vaccines, including commercial process and production techniques and
119
Def.’s Answering Br. 22.
36
methodologies related to those applications.”120 The TLA entitles iBio to “[a]ll
technology and intellectual property in the area of plant-based manufacturing
technologies, techniques and methodologies and associated improvements, whether
for the expression of vaccines and therapeutic proteins or otherwise, whether
previously developed or owned by [Fraunhofer], developed for [iBio] pursuant to
the TTA, or otherwise.”121 “To the extent technology is described more broadly in
the TLA than the original TTA, the description reflects that the TTA was written at
the outset of the parties’ relationship while the TLA was written after years of
development work.”122
The parties also dispute whether the $17 million that iBio allegedly paid to
Fraunhofer under the Agreements123 is commensurate with the ownership rights
iBio claims under the TLA. Fraunhofer, for its part, maintains that
“[p]harmaceutical research is not inexpensive” and that “[t]he payments iBio made
under the TTA for over a decade of research and development are not at the high
end of what this Court has seen.”124 Because I conclude that the TLA, on its face,
120
Fourth Amendment § 2.
121
TLA, App. A.
122
Pl.’s Reply Br. 14.
123
Compl. ¶ 4.
124
Def.’s Answering Br. 21-22.
37
unambiguously expresses the parties’ intent regarding the scope of the technology
being conveyed to iBio, I decline to entertain any arguments regarding the
sufficiency of the corresponding consideration in the context of other, similar such
agreements.125
4. The other Agreements do not support Fraunhofer’s
interpretation of the Agreements
The parties also debate whether the Fifth Amendment, the Sixth
Amendment, the GAA, the RSA, and the Collaboration Agreement bear on the
Threshold Question. As to both the Fifth Amendment and the Sixth Amendment,
Fraunhofer highlights the clause in their Recitals that states “[p]ursuant to the Prior
Agreements, Fraunhofer has developed, validated and filed patents covering a
proprietary platform technology (referred to in the Prior Agreements as the
‘Technology’) that uses plants (which have not been genetically modified).”126
According to Fraunhofer, that provision “confirms that the scope of the technology
in which iBio would have ownership and transfer rights had not changed” from the
original TTA.127 Neither the Fifth Amendment nor the Sixth Amendment,
125
See Eagle Indus., 702 A.2d at 1232 (“If a contract is unambiguous, extrinsic
evidence may not be used to interpret the intent of the parties, to vary the terms of
the contract or to create an ambiguity.”).
126
Fifth Amendment, Recitals; Sixth Amendment, Second Recital.
127
Def.’s Answering Br. 14.
38
however, amends Section 2(i) of the Fourth Amendment or impacts Section 2.1 of
the TLA, both of which favor iBio’s response to the Threshold Question. Thus,
those two Agreements do not alter my analysis.
Further, under each of the GAA, the RSA, and the Collaboration Agreement,
iBio provided to either Fraunhofer or another third-party a license to use iBio’s
technology to perform a discrete task.128 Although those Agreements may
describe, in passing, the technology conveyed between Fraunhofer and iBio under
the TTA, the TTA’s amendments, and the TLA, they do not alter the scope thereof.
As such, because I conclude that the relevant provisions of the amended TTA and
the TLA are unambiguous, and because the GAA, the RSA, and the Collaboration
128
See GAA § 2(a) (“Subject to the terms and conditions of this Agreement, [iBio]
hereby grants to [Fraunhofer] a fully-paid-up, non-exclusive, non-royalty-bearing
license to the Technology solely for the purposes of (i) developing and
manufacturing Global Health Vaccines anywhere in the world and (ii) marketing,
using, and selling (or otherwise distributing) Global Health Vaccines for Global
Access Objectives within GAVI Eligible Countries (‘Field of Use’).”); RSA § 2.2
(“Subject to the terms and conditions of this Agreement, [iBio] hereby grants to
[Fraunhofer], during the Contract Period, a non-exclusive, non-assignable, non-
sublicensable, limited, revocable license solely to access and use the Technology
in order to perform the research for the Project, as set forth in this Agreement.”);
Collaboration Agreement § D(1) (“Subject to the terms and conditions hereof and
of any amendment to this Agreement by which a license is extended to Other
Products, and further to continued compliance with BIO-MANGUINHOS’
obligations hereunder . . . , [iBio] hereby grants to BIO-MANGUINHOS . . . an
exclusive, non-assignable, sublicensable, limited, revocable, royalty bearing
license . . . .”).
39
Agreement are extraneous Agreements that do not amend the TTA or the TLA, I
decline to consider them in the context of the Threshold Question.129
C. iBio Did Not Limit or Waive Its Ownership Rights in the Terms of
Settlement or the Confirmatory Assignment
On June 30 and July 2, 2013, the parties executed the Terms of Settlement
and the Confirmatory Assignment, respectively. According to Fraunhofer, these
two Agreements fit together in that (1) the Confirmatory Assignment effectuated a
conveyance of the forty-nine patents and patent applications that comprised the
totality of the technology to which iBio is entitled under the TTA and the TLA and
(2) the Terms of Settlement constituted a general release of any other obligations,
rights, or claims that either of the parties had under any of the Agreements
consummated to that point.
1. The technology to which iBio is entitled under the TTA and
the TLA is not limited to the Confirmatory Assignment
The parties dispute whether the Confirmatory Assignment is a valid
contract.130 I agree with Fraunhofer that given the Confirmatory Assignment’s
language—including its references to certain of Fraunhofer’s covenants and iBio’s
129
See supra note 125 and accompanying text.
130
Oral Arg. Tr. 54 (“[iBio’s Counsel]: . . . And I think it’s an interesting question of
what Fraunhofer intends by its reference to the confirmatory assignment. . . . [I]n
their answering brief, at times it seemed as though it might be extrinsic evidence.
At other times it seemed like maybe they were treating this as part of the terms of
settlement. But in any case, it is not an agreement. iBio did not sign it.”).
40
rights131—it appears, on its face, to have some contract-like elements. That said,
however, I disagree with Fraunhofer that the Confirmatory Assignment limited the
technology to which iBio is entitled to ownership of under the TTA and the TLA.
In its Recitals, the Confirmatory Assignment references the TLA and indicates that
the parties “agreed, among other things, that certain technology and intellectual
property rights developed by Fraunhofer would be owned exclusively by iBio.”132
The Recitals further noted that “the technology and intellectual rights assigned
pursuant to the [TLA] include the inventions and improvements which are the
subject of and described” in the Appendix to the Confirmatory Assignment. 133 The
body of the Confirmatory Assignment then includes the operative provisions that
purport to convey from Fraunhofer to iBio “Fraunhofer’s entire right, title, and
interest” in the forty-nine patents and patent applications listed in the Appendix in
exchange for the “good and valuable consideration” that iBio provided to
131
See, e.g., Confirmatory Assignment at 2 (“Fraunhofer covenants that it will, when
requested, execute, deliver and acknowledge all such further instruments of
conveyance. . . . This assignment shall inure to the benefit of iBio and its
successors and assigns and shall be binding on Fraunhofer and its successors and
assigns.”).
132
Id., First Recital.
133
Id., Second Recital.
41
Fraunhofer.134 The Confirmatory Assignment concludes with a notary public’s
official seal witnessing and validating Fraunhofer’s representative’s signature.
Nothing in the Confirmatory Assignment indicates that the forty-nine
enumerated patents and patent applications constitute the entirety of the technology
conveyed from Fraunhofer to iBio under the TLA. A plain reading of the
Confirmatory Assignment comports with iBio’s explanation that parties executed
the Confirmatory Assignment to “permit recordation in the U.S. Patent Office of
the transfer from Fraunhofer to iBio of the ownership of U.S. patents and patent
applications.”135
2. The Terms of Settlement does not constitute a general
release of all of the obligations, rights, or claims between the
parties
The Terms of Settlement is a two-page, seven-section settlement agreement
with terms that parties indicated would be “work[ed] . . . into the Seventh
Amendment to the TTA.”136 Section 6 of the Terms of Settlement provides that
“[t]he Parties mutually release each other from any other accrued claims arising
134
Id. at 1-5.
135
Pl.’s Opening Br. 30-31 (citing 35 U.S.C. § 261 (2012) (authorizing the
assignment of a patent or patent application via a written instrument and noting
that notarization of such written instrument “shall be prima facie evidence of the
execution of an assignment, grant or conveyance of a patent or application for
patent”)).
136
Terms of Settlement, Recitals.
42
out of the Prior Agreements.”137 Taken in isolation, this provision appears to be a
general release. Fraunhofer contends, therefore, that “iBio released any claims
arising out of the parties’ agreements,” both known and unknown, including
“claims relating to iBio’s purported ownership of intellectual property that existed
as of June 30, 2013” and “any claims after that date.”138
Because the scope of the Terms of Settlement’s release is at issue,
“application of ejusdem generis [is] permissible.”139 Ejusdem generis is a canon of
contract interpretation that provides as follows:
[W]here general language follows an enumeration of
persons or things, by words of particular and specific
meaning, such general words are not to be construed in
their widest extent, but are to be held as applying only to
persons or things of the same general kind or class as
those specifically mentioned.140
Applying that canon to the release in Section 6 of the Terms of Settlement, I
conclude that the generality of the release is limited by the specificity of the
137
Id. § 6.
138
Def.’s Answering Br. 29-33 (citing Adams v. Jankouskas, 452 A.2d 148, 156-57
(Del. 1982); Hob Tea Room v. Miller, 89 A.2d 851, 856-57 (Del. 1952)).
139
In re IAC/InterActive Corp., 948 A.2d 471, 495 (Del. Ch. 2008).
140
Id. at 495-96 (quoting Aspen Advisors LLC v. United Artists Theatre Co., 861
A.2d 1251, 1265 (Del. 2004)).
43
preceding sections.141 Section 1 of the Terms of Settlement replaces an installment
payment term with a lump-sum payment term, requiring iBio to pay to Fraunhofer
$3 million under the MSA rather than three $1 million payments under the TTA.142
Section 2 releases Fraunhofer’s obligation to make a matching $3 million payment
under the TTA.143 Section 3 provides that “[i]n consideration for the present
transfer by [Fraunhofer] to iBio, or release, of whatever existing claimed
receivables (other than rent) of [Fraunhofer] from iBio that are not otherwise
settled or released by other provisions of this Agreement,” iBio is required to (1)
form an entity, (2) transfer to that entity certain iBio intellectual property to
commercialize anthrax vaccines, and (3) grant Frauhofer a 49% interest in that
entity.144 Section 4 “convert[s] any minimum additional payment” that Fraunhofer
claims under the TTA “into a new agreement pursuant to which [Fraunhofer] will
be entitled to receive payments on iBio revenues from the use of the technology”
141
See Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC, 2010 WL 1838608, at
*8 (Del. Ch. Apr. 28, 2010) (“Even absent a true conflict, specific words will limit
the meaning of general words if it appears from the whole agreement that the
parties’ purpose was directed solely toward the matter to which the specific words
or clause relate. Thus, it is an accepted principle that the general words in a
release are limited always to that thing or those things which were specially in the
contemplation of the parties at the time when the release was given.” (quoting 11
WILLISTON ON CONTRACTS § 32:10 (4th ed. 2009))).
142
Terms of Settlement § 1.
143
Id. § 2.
144
Id. § 3.
44
that iBio transfers to the entity referenced in Section 3.145 Section 5 releases iBio’s
claims against Fraunhofer “for reimbursement of allocated IP costs” under the
GAA and “for prior shortfalls in [Fraunhofer’s] matching funding, as required by
the TTA.”146 And, Section 7 states that “[t]he foregoing agreements are subject to
ratification by the Board of Directors of both parties and Fraunhofer Gesellschaft
management.”147
Thus, all of the Terms of Settlement’s provisions preceding Section 6 relate
to claims between the parties regarding payment terms. Those provisions all either
release or alter various of the parties’ payment obligations under the Agreements,
and, in the context of the Terms of Settlement’s other sections, it appears that the
Agreement’s subject matter is confined to such obligations. I conclude, therefore,
that rather than a general release, Section 6’s “generically-worded ‘other accrued
claims’ must be read as limited to payment obligations between the parties, given
that the specific terms were all directed to payment obligations.”148
145
Id. § 4.
146
Id. § 5.
147
Id. § 7.
148
Pl.’s Opening Br. 28.
45
D. The MSA Does Not Create a Condition Precedent to iBio
Receiving a Technology Transfer
Fraunhofer contends that “iBio is not entitled to an operational technology
transfer until it has honored its financial obligations and the parties have executed a
project addendum specifying the terms of the transfer.”149 Although Fraunhofer
acknowledges that the Fourth Amendment obligates it to “facilitate technology
transfer and implementation by or for [iBio],”150 Fraunhofer maintains that the
MSA amended that obligation “to require the parties to execute a ‘project
addendum’ for any services [Fraunhofer] performed, including a technology
transfer.”151 According to Fraunhofer, “[t]he project addendum must identify the
149
Def.’s Answering Br. 33. The parties distinguish between a title conveyance—
which was effectuated upon the parties’ consummation of the TLA and under
which ownership rights over the technology passed from Fraunhofer to iBio—and
a technology transfer—under which the physical and peripheral items supporting
the technology will be transferred from Fraunhofer to iBio. See Oral Arg. Tr. 13
(“[iBio’s Counsel]: . . . [W]hen we talk about general technology transfer, we are
talking about something that is well-known in the industry, certainly well-known
to Fraunhofer, which is a process where you go into the facility of the person who
has the technology -- and there’s protocols for looking at lab notebooks and
receiving information and things that the technical people would know what to do.
So I’m distinguishing that from a paper transfer agreement, which we have, for
example -- you know, in the TLA.”); Def.’s Answering Br. 33 (“[A]lthough title
has been transferred, iBio is not entitled to an operational technology transfer until
it has honored its financial obligations and the parties have executed a project
addendum specifying the terms of the transfer. . . . An operational technology
transfer can be a time-consuming and expensive process.”).
150
Id. at 34 (quoting Fourth Amendment § 2(ii)).
151
Id. (citing MSA §§ 1.1-1.2).
46
specific technology to be transferred, the scope of the services to be provided by
[Fraunhofer] (including its responsibilities, deliverables, milestones, and
protocols), and the budget and terms of payment for the services” before
Fraunhofer executes any such technology transfer.152 To support its position,
Fraunhofer highlights the MTA, under which Fraunhofer agreed, at iBio’s request,
to facilitate a technology transfer to a third-party, Novici Biotech LLC.153 iBio has
not completed a project addendum for the technology transfer that it claims a right
to under the amended TTA and the TLA, based on its understanding that the
Agreements do not require any such project addendum.
I agree with iBio. The amended TTA and the TLA conveyed ownership of
the relevant technology to iBio. Pursuant to that conveyance, the Fourth
Amendment requires Fraunhofer to facilitate a technology transfer to iBio,154 and
the TLA requires Fraunhofer “to cooperate with [iBio], both during and after
termination of [the TLA], so that [iBio] may enjoy to the fullest extent the right,
152
Id.
153
See MTA, Fourth Recital.
154
Fourth Amendment § 2(ii).
47
title and interest” in the technology conveyed under the TLA. 155 That
“cooperation” clause arguably includes a technology transfer.156
Further, the MSA’s plain language indicates that it was not intended to
create a condition precedent to iBio receiving a technology transfer. The MSA
supplements the TTA and “govern[s] the project activities between [Fraunhofer]
and iBio for the development of pharmaceutical product applications of iBio’s
Technology (each, a ‘Project’).”157 Sections 1.1 and 1.2 of the MSA require a
“Project Addendum” for any “Services” that Fraunhofer performs “in connection
with a Project” and describe the minimum requirements for each Project
Addendum.158 Taking those provisions together, the MSA only requires Project
Addenda for Services Fraunhofer renders in connection with “the development of
pharmaceutical product applications of iBio’s Technology.”159 Section 1.4 of the
155
TLA § 2.1.
156
See also TLA § 9.2(iii) (“Fraunhofer shall provide [iBio’s] designated
representatives and counsel full access to all of Fraunhofer’s records and
personnel relevant to the Technology and Improvements being assigned hereunder
and shall otherwise cooperate and assist such [iBio] representatives and counsel
with actions reasonably required to protect and accomplish technology transfer of
the Intellectual Property Rights in the assigned Technology and Improvements.”
(emphasis added)).
157
MSA, Recital.
158
Id. §§ 1.1-1.2.
159
Id., Recital.
48
MSA confirms that the Agreement’s subject matter is limited to Fraunhofer’s
development Services, as that Section requires the parties to establish a “Joint
Development Committee” to “plan, implement and oversee all development
activities with respect to each Project Addendum.”160 As a result, and because the
MSA is silent as to technology transfers, I decline to find that the MSA created a
condition precedent to Fraunhofer’s obligations in Section 2(ii) of the Fourth
Amendment and Sections 2.1 and 9.2(iii) of the TLA.
The MTA does not alter the above analysis. The parties entered into the
MTA before they entered into the MSA, so it is fair to assume that the MTA does
not represent a project addendum under the MSA. The MTA also does not
implicate a technology transfer between Fraunhofer and iBio, as it instead relates
to a technology transfer from Fraunhofer to Novici Biotech LLC. Because the
TTA and the TLA explicitly provide for a technology transfer from Fraunhofer to
iBio and no similar provision exists in those Agreements for technology transfers
to other, third-parties, it makes sense that the parties would enter into a separate
agreement to facilitate such a third-party transfer.
160
Id. § 1.4.2.
49
E. iBio’s Complaint and Discovery Responses Do Not Limit Its
Contractual Arguments
Fraunhofer avers that iBio’s statements in its Complaint and discovery
responses “limit[] the scope of the technology at issue” in the following ways: (1)
“iBio limits its claims to technology developed under the TTA”; (2) “iBio limits its
claims to proprietary know-how”; and (3) “iBio specifies that the technology at
issue is limited to ‘launch vectors’ and non-genetically-modified plants.”161
According to Fraunhofer, those statements constitute “[v]oluntary and knowing
concessions of fact made by a party during judicial proceedings”—i.e., “judicial
admissions”—that are “binding both upon the party against whom they operate,
and upon the court.”162 I review each of those three categories of statements
seriatim and conclude that those statements do not limit iBio’s response to the
Threshold Question.
First, in the Complaint, although iBio at times appears to claim a right only
to technology developed under the TTA,163 iBio also, at other times, acknowledges
161
Def.’s Answering Br. 3-4.
162
Merritt v. United Parcel Serv., 956 A.2d 1196, 1201-02 (Del. 2008).
163
See, e.g., Compl. ¶ 107 (“iBio is entitled to an order of specific performance,
requiring Fraunhofer to confirm transfer of title to all technology developed
pursuant to the TTA, as amended and supplemented, through December 31, 2014,
and to facilitate technology transfer to iBio of all information concerning such
technology.”).
50
its comprehensive ownership rights over “[a]ll technology and intellectual property
. . . whether previously developed or owned by [Fraunhofer], developed for [iBio]
pursuant to the TTA, or otherwise.”164 Hence, I disagree that the Complaint
contains a judicial admission that iBio’s claims are limited to technology
developed under the TTA.
Second, Fraunhofer points to both the Complaint and to iBio’s Responses to
Fraunhofer’s First Set of Interrogatories as evidence that iBio’s claims are limited
to “proprietary know-how” and exclude “proprietary rights under patent, copyright,
trademark, and design patent or industrial design law.”165 I agree that iBio’s
response to the Threshold Question confirms that its claims are limited to
“proprietary” intellectual property rights over the technology. 166 Nothing in iBio’s
Complaint or discovery responses, however, indicates that its claims are limited to
“know-how.” In the Complaint, iBio alleges that its “proprietary rights in the
technology include ownership rights to numerous patents and to valuable
164
Id. ¶ 54 (quoting TLA, App. A); accord id. ¶ 57 (“Thus, iBio’s ownership rights in
‘the Technology and Improvements, including the Intellectual Property Rights
relating thereto’ are comprehensive, and encompass all conceivable proprietary
rights developed by Fraunhofer ‘in the area of plant-based manufacturing
technologies, techniques and methodologies and associated improvements.’”
(quoting TLA § 8.1, App. A)).
165
Def.’s Answering Br. 6-7
166
See supra text accompanying note 34.
51
unpatented aspects of the technology such as extensive confidential know-how.”167
The words “include” and “such as” indicate that “know-how” is demonstrative
rather than exhaustive, and other allegations in the Complaint confirm the broad
scope of iBio’s claims.168
In addition, in its Responses to Fraunhofer’s First Set of Interrogatories, iBio
does not, as Fraunhofer claims, “confirm that its claims are not based on
proprietary rights under patent, copyright, trademark, and design patent or
industrial design law.”169 Rather, iBio’s Responses merely confirm that its claims
are for breach of contract rather than for misappropriation of trade secrets.170 In so
confirming, iBio expressly stated that its “claims include all technology, including
all know how, confidential and trade secret information, without need for
differentiation.”171 Such statements are consistent with iBio’s response to the
Threshold Question.
167
Compl. ¶ 9.
168
See, e.g., id. ¶ 57 (“iBio’s ownership rights . . . encompass all conceivable
proprietary rights developed by Fraunhofer . . . .”).
169
Def.’s Answering Br. 6.
170
Id., Ex. 2 at 10-11 (“The Verified Amended Complaint has not set forth a claim
for misappropriation of trade secrets under the Delaware statute . . . although iBio
reserves the right to bring a claim that Fraunhofer has improperly used for, or
disclosed to, third parties information of iBio that qualifies as trade secrets. . . .
iBio’s claims are based in contract.”).
171
Id. at 11.
52
Third, Fraunhofer cites to certain of the Complaint’s allegations regarding
the technology that Fraunhofer developed for iBio to support its contention that
iBio’s claims are limited to “launch vectors” or “non-genetically modified plants.”
For example, the Complaint states that “iBio’s technology uses ‘launch vectors’—
the vehicles for transporting DNA from one cell to another—to rapidly engineer
and produce high levels of target proteins in non-genetically-modified plants.”172 I
reject the notion that such background descriptions of the parties’ development
work constitutes a binding limitation on iBio’s claimed technology. Nothing in the
wording of those allegations indicates that iBio voluntarily and knowingly
conceded173 that its claims were limited to “launch vectors” or “non-genetically
modified plants,” especially in the presence of iBio’s other allegations asserting
ownership over a broad range of intellectual property rights.174
F. iBio’s Ownership Rights Only Extend to Technology Developed
Through December 31, 2014
Fraunhofer’s final argument is that its “obligation to develop technology for
iBio and transfer technology to iBio ended on December 31, 2014.”175 I agree.
172
Compl. ¶ 5.
173
Merritt, 956 A.2d at 1201-02.
174
Compl. ¶ 57.
175
Def.’s Answering Br. 29.
53
Section 2 of the Fourth Amendment extends the TTA through December 31, 2014,
requiring Fraunhofer to continue to develop and transfer to iBio the relevant
technology.176 Moreover, the Complaint confirms that iBio only seeks a
declaratory judgment regarding its ownership rights over the technology that
Fraunhofer developed through that date.177
iBio argues, in its reply brief, that it is entitled to all Improvements,
“regardless of when made,” and that any Improvements “must be included in
Fraunhofer’s technology transfer to iBio.”178 Yet, that position is contradicted
directly by Section 2 of the Fourth Amendment, which only obligates Fraunhofer
to “facilitate technology transfer and implementation by or for [iBio]” through
December 31, 2014.179 As such, iBio fails to point to any contractual provisions
that prohibit Fraunhofer from developing additional Improvements or require it to
transfer any such Improvements to iBio.
176
Fourth Amendment § 2.
177
Compl. ¶ 97 (“iBio is entitled to a declaratory judgment that: (i) iBio is the
exclusive owner of all right, title, and interest in and to all technology developed
by Fraunhofer through December 31, 2014 . . . .” (emphasis added)).
178
Pl.’s Reply Br. 19.
179
Fourth Amendment § 2.
54
III. CONCLUSION
For the foregoing reasons, I answer the Threshold Question in iBio’s favor,
except to the extent that iBio contends that it is entitled to Improvements made
beyond December 31, 2014.
IT IS SO ORDERED.
55