Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
MESO SCALE DIAGNOSTICS, LLC, )
MESO SCALE TECHNOLOGIES, LLC, )
)
Plaintiffs, )
)
v. ) C.A. No. 5589-VCP
)
ROCHE DIAGNOSTICS GMBH, )
ROCHE DIAGNOSTICS CORP., )
ROCHE HOLDING LTD., )
IGEN INTERNATIONAL, INC., )
IGEN LS LLC, )
LILLI ACQUISITION CORP., )
BIOVERIS CORP., )
)
Defendants. )
MEMORANDUM OPINION
Submitted: November 8, 2013
Decided: June 25, 2014
Collins J. Seitz, Jr., Esq., David E. Ross, Esq., SEITZ ROSS ARONSTAM & MORITZ
LLP, Wilmington, Delaware; Mark C. Hansen, Esq., Michael J. Guzman, Esq., Joseph S.
Hall, Esq., Gregory G. Rapawy, Esq., Christopher C. Funk, Esq., Joseph A. Bingham,
Esq., KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C.,
Washington, D.C.; Attorneys for Plaintiffs.
Joel E. Friedlander, Esq., FRIEDLANDER & GORRIS, P.A., Wilmington, Delaware;
Nancy J. Sennett, Esq., Paul Bargren, Esq., Brett H. Ludwig, Esq., Eric L. Maassen, Esq.,
FOLEY & LARDNER LLP, Milwaukee, Wisconsin; Attorneys for Defendants.
PARSONS, Vice Chancellor.
This action arises from the alleged breach of a license agreement pertaining to
sophisticated diagnostic and assay technology. In 2003, a foreign pharmaceutical and
diagnostic holding company lost or was in danger of losing its license to that technology.
The holding company, therefore, sought to acquire a new license from the then-patent
holder. In 2003, the holding company entered into a series of contemporaneously
executed agreements that granted it a new non-exclusive license from the patent holder.
The plaintiffs, two Delaware limited liability companies with disputed springing rights to
the same patented technology, consented to the second non-exclusive license and ―joined
in‖ the licenses granted thereunder. As part of that transaction, the holding company
acquired the patent holder, but not before its intellectual property assets were transferred
to a separate company. In 2007, the holding company also acquired that separate
company.
The plaintiffs allege that, since at least 2007, the defendants have disregarded
repeatedly and deliberately the field-of-use restrictions prescribed in the 2003 license
agreement. The plaintiffs aver that, by consenting to and ―joining in‖ the licenses granted
in the license agreement, they became parties to that agreement with the corresponding
right to enforce the agreement‘s field-of-use limitations. As such, the plaintiffs assert
that they are entitled to both an award of monetary damages, perhaps as much as several
hundred million dollars, for the defendants‘ breaches of the license agreement since 2007
and an order of specific performance requiring the defendants to honor the 2003
agreement‘s field-of-use constraints for so long as the agreement remains valid.
1
In response, the defendants deny that the plaintiffs became parties to the license
agreement by virtue of the ―join in‖ language. According to the defendants, they neither
needed nor received a license from the plaintiffs. Thus, the defendants argue that they do
not owe the plaintiffs any contractual duties under the 2003 license agreement and that
the plaintiffs lack standing to assert claims for breach of that agreement.
This Memorandum Opinion constitutes my post-trial findings of fact and
conclusions of law on the plaintiffs‘ claim for breach of contract. For the reasons that
follow, I conclude that the plaintiffs have failed to establish that they are parties to the
license agreement or that they otherwise have standing to enforce the agreement‘s field-
of-use restrictions. Because the plaintiffs are not parties to the license agreement and
cannot enforce it, they have failed to prove that the defendants owed them a contractual
duty under that agreement. Therefore, I find in favor of the defendants and dismiss the
plaintiffs‘ claim for breach of contract with prejudice.
I. BACKGROUND
A. The Parties
The plaintiffs, Meso Scale Diagnostics, LLC (―MSD‖) and Meso Scale
Technologies, LLC (―MST‖ and, collectively, ―Plaintiffs‖ or ―Meso‖) are Delaware
limited liability companies. MST was founded by Jacob Wohlstadter (―Wohlstadter‖) to
commercialize his invention of a new application of electrochemiluminescence (―ECL‖)
technology. In 1995, MST and IGEN International, Inc. (―IGEN‖) formed MSD as a
joint venture. The joint venture was created to research and develop the use of various
2
technologies in diagnostic procedures, including procedures utilizing ECL technology.
Wohlstadter is the President and Chief Executive Officer (―CEO‖) of MSD and MST.
The defendants in this case (collectively, ―Defendants‖) are identified below and
are all affiliates or subsidiaries of the F. Hoffmann–La Roche, Ltd. family of
pharmaceutical and diagnostics companies. Roche Holding Ltd. (―Roche‖) is a publicly
traded joint stock company organized under the laws of Switzerland. Roche Diagnostics
GmbH is a limited liability company organized under the laws of Germany and a wholly
owned subsidiary of Roche. Roche Diagnostics Corp., which is incorporated in Indiana,
is also a wholly owned subsidiary of Roche. IGEN is a Delaware corporation that was
acquired by Roche in 2003 and remains a wholly owned subsidiary of Roche. IGEN LS,
LLC (―IGEN LS‖) is a Delaware limited liability company and wholly owned subsidiary
of IGEN. BioVeris Corp. (―BioVeris‖) is a Delaware corporation and wholly owned
subsidiary of Roche. BioVeris owns and licenses a portfolio of patents based on and
related to ECL technology. Lili Acquisition Corp. (―Lili Acquisition‖) was a subsidiary
of Roche; it was merged into BioVeris on June 26, 2007, and no longer exists.
B. Facts
1. The 1992 and 1995 Licenses
In 1992, IGEN granted an exclusive license to Boehringer Mannheim GmbH
(―Boehringer‖) to use ECL technology for diagnostic testing at hospitals, blood banks,
and clinical reference laboratories (the ―1992 License‖).1 Boehringer also agreed in the
1
JTX 6 § 1.4.
3
1992 License not to ―advertise, market, sell or otherwise commercially exploit‖ ECL
technology outside of those specified areas.2
In 1995, IGEN and MST formed MSD as a joint venture. Arguably, IGEN‘s most
significant contribution to the joint venture was granting MSD an exclusive license to
practice ECL technology in certain areas (the ―1995 License‖). Specifically, MSD
received an exclusive license ―to practice [ECL technology] to make, use and sell
products or processes (A) developed in the course of the Research Program, or (B)
utilizing or related to the Research Technologies.‖3 IGEN, however, was not required ―to
grant MSD a license to any technology that is subject to exclusive licenses to third parties
granted prior to the date‖ of the 1995 License. This apparently included the technology
licensed to Boehringer in the 1992 License. The 1995 License also contained a
―springing rights‖ provision. The provision states that, if any preexisting exclusive
license ―terminates, or IGEN is otherwise no longer restricted by such license from
2
Id. § 4.7.
3
JTX 10 § 2.1. As defined in a 2001 amendment to the joint venture agreement
between IGEN and MST, the Research Technologies encompassed: (1) selection
and screening methods; (2) disposable electrodes; and (3) multi-array diagnostics.
JTX 48 § 1.11 at MESO00053172-73. They also included other technologies such
as ―agents to extend the electric potential of an electrode in the direction
perpendicular to its surface.‖ Id. at MESO00053173. The Research Program was
―initially [to] be directed‖ at the use of those same technologies in diagnostic
procedures. Id. Ex. A at MESO00053220. The definitions of ―Research Program‖
and ―Research Technologies‖ were redacted in IGEN‘s public filings such that it
was not possible to discern the scope of MSD‘s ECL rights from publicly
available information.
4
licensing such technology to MSD, such technology shall be, and hereby is, licensed to
MSD pursuant hereto.‖4
2. IGEN sues Boehringer
In 1997, IGEN sued Boehringer for numerous breaches of the 1992 License,
including the sale of products outside of the agreement‘s designated markets. 5 Shortly
thereafter, Roche acquired Boehringer, took over the defense of the IGEN lawsuit, and
began its efforts to negotiate a non-judicial resolution to the dispute.
For several years, Roche and IGEN engaged in fruitless settlement discussions. In
December 2001, Roche made an offer to resolve the two sides‘ disagreement by
acquiring IGEN for $1.5 billion.6 Roche‘s offer was contingent on due diligence, which
―quickly identified the relationship between IGEN and MSD as a roadblock to the
intended acquisition.‖7 Although Roche‘s due diligence team was able to ―to obtain an
unedited version‖ of the ―voluminous and convoluted contracts‖ that defined the
relationship between IGEN and Meso, the diligence team‘s analysis was ―complicated by
the fact that neither IGEN nor MSD/MST legal counsel nor operations personnel
appeared forthcoming or willing to discuss‖ those agreements.8 Nevertheless, the team
4
JTX 10 § 2.1
5
JTX 15.
6
JTX 62.
7
Id. at ROCHE0036626.
8
Id.
5
concluded that if Roche acquired IGEN, as it was, that acquisition ―would not achieve the
stated objectives of unencumbered ownership [of certain ECL technology], avoidance of
future litigation and discontinuation of business relationships with business entities
controlled by the Wohlstadter family.‖9 Consequently, in late-December 2001, Roche
informed IGEN that it would ―not pursue an acquisition unless IGEN/MSD/MST would
first redefine the nature of their relationship substantially.‖10
IGEN and Roche were continuing to negotiate when, on January 10, 2002, IGEN
prevailed at trial against Roche on, among other things, its claim that Roche had breached
the terms of the 1992 License.11 A jury awarded IGEN damages in excess of $500
million and the district court ruled that, based on Roche‘s breaches of the 1992 License,
IGEN could terminate that agreement.12
3. Roche decides to pursue a new license from IGEN
Notwithstanding the verdict against Roche, IGEN and Roche continued to discuss
the possibility of settling their dispute by having Roche acquire IGEN. On May 3, 2002,
however, Roche advised IGEN that it was no longer interested in pursuing an
acquisition.13 Its reason for the change in objective was twofold. First, for Roche to
9
Id.
10
Id. at ROCHE0036627.
11
IGEN Int’l, Inc. v. Roche Diagnostics GmbH, 335 F.3d 303, 308 (4th Cir. 2003).
12
Id.
13
JTX 71.
6
become comfortable with acquiring IGEN, there would need to be a ―major
modification‖ of the relationship between IGEN and Meso. Roche believed that Meso‘s
demand for compensation to effectuate such a modification was ―likely to be substantial,‖
and there was ―not enough value in the business‖ to warrant a purchase price that likely
would be acceptable to both IGEN and Meso.14 Second, Roche expressed concern that
any payment to Meso would be perceived by certain IGEN shareholders as payment
―behind their back,‖ designed to divert value away from them, which, in turn, could lead
those shareholders to attempt to enjoin the transaction or refuse to tender their shares.
Roche proposed that the best path forward for both sides was to agree to a non-exclusive
license because Roche was ―the best possible licensee of IGEN.‖15
About a month later, in June 2002, Roche and IGEN participated in a court-
ordered mediation of their dispute. Consistent with Roche‘s May 2002 letter, Roche
proposed that IGEN grant it a non-exclusive license ―to the ECL Technology which is the
subject of the [1992 License].‖16 The proposal also included a list of some of the
―material elements‖ of such a license, including that ―[Meso] would consent to and join
in the license granted to Roche as necessary to insure Roche‘s non-exclusive use of the
14
Id.
15
Id.
16
JTX 73 at BV0003206.
7
ECL Technology in Roche‘s field.‖17 Another ―material element‖ was that
improvements to the ECL Technology previously made by Roche and conveyed to IGEN
could be used by IGEN only in ―fields of use other than the Field licensed to Roche.‖18
4. Roche and IGEN begin to exchange draft license agreements
On July 22, 2002, IGEN circulated a draft license agreement to Roche. This
appears to be the first draft of an agreement that was shared among both sides. IGEN‘s
proposal included a defined ―Field‖ in which Roche would be allowed to utilize ECL
technology. The draft made no reference to Meso.19
On August 1, 2002, Roche proposed its own draft of a license agreement to IGEN.
Roche‘s draft called for IGEN and its ―Affiliates‖ to grant Roche a license to use ECL
technology within a defined field.20 The definition of the term ―Affiliates‖ explicitly
included Meso.21 Roche also included an attached page entitled ―Consent by IGEN
Affiliates.‖ The proposed consent provided that Meso would ―consent to and join in the
17
Id. at BV0003207. I previously concluded that the phrase ―join in the licenses
granted‖ in the pivotal 2003 License Agreement is ambiguous. Meso Scale
Diagnostics, LLC v. Roche Diagnostics GmbH, 62 A.3d 62, 93 (Del. Ch. 2013).
Therefore, I recite below some of the relevant extrinsic evidence pertaining to that
agreement.
18
Id.
19
JTX 76.
20
JTX 78 § 2.2.
21
Id. at ROCHE0053800.
8
licenses granted‖ in the agreement.22 In addition, Roche‘s draft contemplated that Meso
would represent and warrant that it did not have ―any right, title, and interest in the
Licensed ECL Technology licensed to Roche‖ in the proposed agreement ―that would in
any way restrict or limit Roche‘s exercise of the licenses [being] granted.‖ 23 Less than
two weeks later, Franz Humer, the Chairman of Roche, wrote to Samuel Wohlstadter,
Chairman and CEO of IGEN and Wohlstadter‘s father, to reemphasize Roche‘s position
in the ongoing settlement discussions. Humer wrote in part that ―[a]ny settlement has to
achieve for Roche complete freedom of operation in our field, including complete
protection from the ‗Meso‘ companies. Roche will not negotiate with Meso and I
consider it your responsibility to deliver the necessary consents and covenants from
Meso.‖24
On October 9, 2002, IGEN granted certain Roche employees access to unredacted
versions of its agreements with Meso.25 Roche‘s outside counsel had been in possession
of those documents for a ―few weeks‖ before IGEN authorized anyone employed by
Roche to review them.26
22
Id. at ROCHE0053799.
23
Id.
24
JTX 81 at ROCHE0057409.
25
JTX 86.
26
Id. On August 20, 2002, outside counsel for Roche indicated in an email to Bill
Perlstein, an IGEN employee, that Meso‘s ―exclusive rights in the ECL
Technology appeared to encompass all of Roche‘s rights under the 1992 License
9
On November 6, 2002, IGEN circulated an updated draft of the license agreement
to Roche. In this version, IGEN removed the Meso ―consent‖ and also amended the
definition of ―Affiliate‖ such that ―[MSD] . . . shall not be deemed an Affiliate of [IGEN]
for purposes of this Agreement unless [IGEN] elects by written notice to [Roche] to
include such company as an [IGEN] Affiliate.‖27 IGEN also removed all references to
―Affiliates‖ from the draft agreement‘s grant clause.28
On November 22, 2002, Roche sent IGEN its next proposal for how the license
agreement should be structured. In it, Roche reinserted: (1) MSD and MST into the
definition of Affiliates; (2) the term ―Affiliates‖ into the agreement‘s grant clause; (3)
and the Meso consent, which, as in previous drafts, appeared after the Roche and IGEN
signature blocks, but before the agreement‘s exhibits.29 The consent also contained a
new footnote stating that ―Roche is considering whether a formal license of ECL
Technology from MSD/MST to [Roche] may be necessary to assure [Roche‘s] access to
all ECL Technology. This issue is subject to further due diligence by Roche.‖30
Agreement once that Agreement was terminated or became non-exclusive.‖ JTX
82.
27
JTX 101 at ROCHE0032572.
28
See id. at ROCHE0032575 (―[IGEN] hereby grants to [Roche], only for use in the
Field, a Non-Exclusive, worldwide, fully-paid, royalty-free right and license under
the Licensed ECL Technology‖).
29
JTX 104 at CSM0033021, 33026, and 33040.
30
Id. at CSM0033040.
10
On January 17, 2003, IGEN‘s counsel circulated a marked-up draft agreement to
Roche‘s counsel. The marked changes had ―not been accepted by either party,‖ but,
instead, were ―merely intended to memorialize what [was] discussed during [a]
conference call‖ held earlier that day.31 The mark-up of the grant clause, Section 2.1 of
the agreement, read ―IGEN OBJECTS TO ‗and its Affiliates‘32: Roche is concerned (1)
that there are springing exclusive rights in Meso that would preclude granting all of these
non-exclusive rights to Roche; and (2) that IGEN has not granted rights to its Affiliates
which would prevent IGEN from granting these licenses.‖33 IGEN‘s mark-up did not
comment regarding Roche‘s first listed concern, but it stated that ―IGEN believes (2) can
be resolved through due diligence.‖34
5. Roche and IGEN continue to negotiate; MSD signs a confidentiality
agreement
On April 29, 2003, Roche and MSD executed a formal confidentiality
agreement.35 Immediately thereafter, Roche and IGEN began including Meso‘s outside
counsel on emails circulating draft license agreements.36
31
JTX 118 at ROCHE0038187.
32
In other words, IGEN objected to the proposed language that IGEN and its
―Affiliates‖ would be granting licenses under the agreement.
33
JTX 118 at ROCHE0038195.
34
Id.
35
JTX 144. In November 2002, IGEN sent MSD a ―confidentiality agreement for
signature by MSD, IGEN and Roche to be executed in connection with providing
to MSD a copy of the draft documents sent to Roche by IGEN.‖ JTX 102. It is
unclear whether any of IGEN, MSD, or Roche executed this document. At a
11
Meso argues that before the execution of the confidentiality agreement,
Wohlstadter represented Meso in negotiating directly with Roche and IGEN. The record,
however, does not support this assertion. In addition to his roles at Meso, Wohlstadter
also served as a consultant to IGEN.37 There was credible testimony that, during the
early negotiations between Roche and IGEN, Wohlstadter‘s presence and participation in
various meetings was in his role as a consultant to IGEN.38 In addition, IGEN‘s General
Counsel, on numerous occasions, indicated specifically that he was, pre-April 2003,
forwarding documents and drafts to Wohlstadter related to IGEN‘s negotiations with
Roche, ―solely in his capacity as a consultant to IGEN.‖39 I also note that, on December
2, 2002, the Joint Venture Operating Committee (―JVOC‖) of MSD met to discuss
IGEN‘s negotiations with Roche and the ―effect [] the proposed transaction with Roche
minimum, the record indicates that Roche was neither aware of, nor party to, this
particular confidentiality agreement.
36
JTX 146.
37
JTX 46.
38
See Tr. 581–82 (Steinmetz) (―Q: And did anybody ever give you any indication as
to whether Jacob Wohlstadter was participating with his MSD hat on or with an
IGEN hat on? A: Yes. Q: Who did and what was the indication you were given?
A: Our understanding was that Jacob was acting on behalf of IGEN . . . Sam
Wohlstadter . . . sa[id] that Jacob was acting as a consultant to IGEN, which made
sense to us in a way‖); Tr. 753–55 (Keller) (―Q: What did you understand to be
[Jacob Wohlstadter‘s] role when he was present? A: Well, he was clearly
introduced to us as an agent or consultant of IGEN. We knew, of course, he is
Meso, I don‘t know chairman or president, but for us, he was sitting there as a
member of the IGEN team.‖).
39
See JTX 106, 108, 109, 110, 111, 113.
12
would have upon [MSD].‖40 In response to a question from IGEN‘s management ―as to
what role, if any, the [JVOC] envisioned for Jacob Wohlstadter in the negotiations with
Roche scheduled to begin the following day,‖ after ―considerable discussion,‖ the JVOC
―concluded that Jacob‘s role in the negotiations should be limited to technical advice only
and that it was not appropriate for Jacob to be a party to [IGEN‘s] negotiation strategy.‖41
As of April 29, MSD and MST still were defined explicitly as ―Affiliates‖ of
IGEN and the Meso consent from the November 22, 2002 draft agreement remained
largely unchanged.42 IGEN considered this draft consent ―acceptable,‖ but noted that it
was subject to ―discussion with MSD and MST‖ after they completed a confidentiality
agreement with Roche.43
On May 2, 2003, Kenneth Slade, outside counsel for IGEN,44 distributed an
updated draft of the license agreement purporting to reflect changes based on discussions
40
JTX 115.
41
Id. Thus, to the extent Wohlstadter forwarded drafts and documents to Meso‘s
outside counsel to review before Meso and Roche reached a confidentiality
agreement, I find that Roche (and probably IGEN as well) neither knew about, nor
authorized, that conduct.
42
JTX 147 at FL032452.
43
Id.
44
Throughout the negotiations between Roche and IGEN, Slade consolidated the
two sides‘ comments and circulated updated drafts of the license agreement. After
MSD executed the confidentiality agreement, Meso submitted its comments on
drafts, along with IGEN‘s comments, through Slade. Thus, the trial record
indicates that Roche and Meso did not negotiate directly with one another before
the ultimate license agreement between Roche and IGEN was finalized in July
2003.
13
held earlier that day between IGEN, presumably with input from Meso, and Roche. In
this draft, MSD and MST were excluded specifically from the definition of an IGEN
―Affiliate.‖ Additionally, the definition of ―Licensed ECL Technology‖ was amended to
specify that IGEN either owned, or had the right to sublicense, the underlying technology
at issue.45 As to the Meso consent associated with this version of the agreement, Meso
asked that the ―join in‖ language and Meso‘s representation that they had no rights in the
Licensed ECL Technology be removed.46
On May 8, 2003, Slade circulated the next draft of the agreement. In this updated
version, Roche reinserted the ―join in‖ language and suggested a modified version of the
―no rights‖ clause that had been included in the April 29 version. Specifically, Roche
proposed that MSD and MST ―represent and warrant to [Roche] that they have no right
. . . to in any way restrict or limit [Roche‘s] exercise of the license granted in the License
Agreement.‖47
On May 30, 2003, IGEN circulated a draft of the agreement and corresponding
comments internally and to Meso. Of particular relevance are Section 9.6 and the
attached consent. Regarding Section 9.6, the draft stated:
ROCHE MAY 20 PROPOSAL: and (iv) no consent, notice,
approval, authorization, waiver or permit, to or from any
person [MSD: excluding any consents attached hereto],
45
JTX 156 § 1.8.
46
Id. at FL0032616.
47
JTX 163 at MESO00000802.
14
including, but not limited to, any Governmental Entity or
third party holder of intellectual property rights is required to
be obtained or made by IGEN in connection with its
execution and delivery of this Agreement [MSD: delete
remainder] or the consummation of the transactions
contemplated hereby.48
At this time, the consent still included both the ―join in‖ language and Roche‘s request
that Meso represent and warrant that it had ―no rights‖ that could interfere with Roche‘s
exercise of the license being granted in the License Agreement.49
On June 3, 2003, Slade distributed the most updated version of the agreement to
Roche, IGEN, and Meso. By this date, Roche‘s proposed language in Section 9.6(iv) had
been modified to read:
(iv) no consent, notice, approval, authorization, waiver or
permit, to or from any person (other than the consent attached
hereto), including, but not limited to, any Governmental
Entity or third party holder of intellectual property rights is
required to be obtained or made by IGEN in connection with
its execution, delivery and performance of this Agreement.50
The Meso consent in the draft circulated on June 3 included the ―join in‖ language, but, at
Meso‘s insistence, did not include the ―no rights‖ representation and warranty that Roche
previously had sought.51 After the June 3 draft, the substance of the Meso consent
remained the same.
48
JTX 182 § 9.6.
49
Id. at MESO00009447.
50
JTX 183 § 9.6.
51
Id. at MESO00059891.
15
6. IGEN’s right to terminate the 1992 License is upheld; Meso seeks
compensation for the first time
During the course of negotiations regarding the License Agreement, on July 9,
2003, the United States Court of Appeals for the Fourth Circuit decided Roche‘s appeal
of the January 2002 verdict against it.52 In its decision, the Fourth Circuit reduced the
compensatory damages award and vacated the punitive damages award that the trial court
had entered against Roche. The Fourth Circuit, however, upheld IGEN‘s right to
terminate the 1992 License. That same day, IGEN‘s General Counsel, Daniel Abdun-
Nabi, sent written notice to Roche that IGEN was terminating the 1992 License.53
On July 15, 2003, Humer sent a letter to the Roche board to update them on the
status of the ongoing negotiations with IGEN. Humer noted that, although the Fourth
Circuit upheld IGEN‘s right to terminate the 1992 License, it was in both Roche‘s and
IGEN‘s interests to agree to a new license, and that the two sides were ―as close as they
have ever been to a successful conclusion.‖54 According to Humer, the two sides had
reached agreement on a ―deal structure‖ that would allow Roche to achieve several
―objectives‖ including ―[f]ull unhindered access to ECL technology‖ and ―[c]onsent and
agreement of ‗Mesoscale Diagnostics‘, an associated company of IGEN owned by
[Samuel] Wohlstadter‘s son to all agreements between Roche and IGEN.‖ 55 Humer
52
IGEN Int’l, Inc. v. Roche Diagnostics GmbH, 335 F.3d 303 (4th Cir. 2003).
53
JTX 198.
54
JTX 206 at ROCHE0022446.
55
Id. at ROCHE0022447.
16
described this ―consent and agreement‖ as ―necessary‖ because ―Mesoscale could block
the deal based on a complicated set of internal agreements between IGEN and
Mesoscale.‖56 Nowhere in the letter, however, does Humer suggest that Roche had
sought or obtained a license from Meso. He further stated that he expected ―to be able to
sign final documents and agree on the price [of the transaction with IGEN] by the
weekend of July 20.‖57
Also on July 15, Wohlstadter, for the first time, requested compensation for
Meso‘s role in the 2003 transaction.58 The following day, he sent a memo, prepared with
56
Id. Meso‘s ―blocking power‖ stemmed largely from its ability to preclude IGEN
from transferring its ownership interest in MSD to a new company that was being
formed as part of the 2003 transaction (i.e., BioVeris). IGEN‘s former CFO,
George Migausky, testified that ―the deal structure was such that Roche would
acquire -- acquire IGEN. Simultaneously, IGEN -- well, IGEN previously would
have dropped certain assets that Roche was not interested in acquiring, would drop
certain assets into a sub, and that sub, BioVeris, would be spun out to the
shareholders. . . . And for those assets being spun out to one of which was our
joint venture interests in MSD, together with a number of other interests, other
licenses and multiple other agreements, actually, in many cases, we needed to get
consents.‖ Migausky Dep. 64. The deal was structured this way to avoid ―several
hundred million dollars‖ of ―tax leakage‖ that would have been borne by IGEN‘s
shareholders. Id. at 64–65. According to Migausky, this gave MSD ―holdup
value‖ because ―[t]he way we had the deal structured, we needed -- we, IGEN that
is, needed MSD‘s consent, and so they could potentially block the transaction,
unless they gave -- unless they gave consent, and could require, in this case,
payment if -- in order to accommodate them.‖ Id. at 69–70.
57
JTX 206 at ROCHE0022446.
58
JTX 205.
17
the assistance of Meso‘s outside counsel Robert Waldman,59 to the JVOC outlining the
reasons he believed Meso was entitled to some payment in exchange for its participation
in the deal between IGEN and Roche. In the introduction of the memo, Wohlstadter
wrote ―[a]s a result of being required to consent to the I[GEN]/R[oche] transaction, to
join in the license from NEWCO to Roche, and to become a party to various agreements
(such as the Covenant Not to Sue and releases), MSD believes it will suffer substantial
diminution in rights, prospects and value.‖60 The memo also describes, using specific
examples, how the 2003 transaction would be detrimental to MSD. Yet, at no point in
the memo does Wohlstadter indicate that Meso is granting Roche a license or that Meso
had acquired any ―springing rights‖ by virtue of IGEN‘s purported termination of the
1992 License Agreement. In contrast, the memo states at least six times that IGEN or
BioVeris would be granting rights to Roche in the deal being contemplated. 61 One such
reference to licensing by IGEN appears in the following example of potential detriment
to MSD:
As a result of the 4th Circuit decision, IGEN terminated the
1992 license agreement between IGEN and Roche, and by
granting the new license to Roche, IGEN is reinstating Roche
into the largest IVD [in-vitro diagnostic] market (large
laboratories). If IGEN did not grant the license to Roche,
59
See Tr. 367 (Waldman) (―Q: You helped draft [the July 16, 2003 memo], and you
were involved in preparing it? A: Yes, I believe so.‖).
60
JTX 210 at MESO00053070 (emphasis added).
61
Id. ¶¶ 1, 2, 5, 6.
18
MSD would not have the world‘s largest bio/pharma
company as a direct competitor.62
Wohlstadter also recognized that, under the proposed license agreement, MSD
would not be entitled to compensation if Roche breached the ―out-of-field‖ provisions
contained therein. He wrote:
Through the ―out-of-field‖ sales provisions of the proposed
new license between [BioVeris] and Roche, in effect, IGEN is
granting ROCHE the ability to sell products outside of the
IVD market so long as Roche does not ―know‖ that the use of
the products is outside of IVD. If Roche makes any out-of-
field sale, Roche‘s only consequence is to pay 65% of
undisputed revenues earned the prior year and only after
Roche has been informed by IGEN of the out-of-field sales.
The license does not terminate for out-of-field sales.
Therefore, Roche can sell with impunity outside the field,
with the only penalty being a small ―toll,‖ which broadens
Roche‘s ability to directly compete with MSD. In addition,
MSD receives no compensation as a result of any such
breaches by Roche.63
Three days later, on July 18, the JVOC responded to Wohlstadter. In its memo,
the JVOC encouraged MSD to grant all of the ―consents‖ that it was being asked to
provide by Roche and IGEN as part of the 2003 transaction, and to do so ―without any
compensation.‖64 To support its position, the JVOC listed five specific factors that
weighed in favor of MSD executing the proposed consents, including:
62
Id. ¶ 5.
63
Id. ¶ 6.
64
JTX 221 at MESO00006196.
19
If the Roche transaction is not completed, the scope of the
rights granted to Roche under the proposed licensing
arrangements is largely irrelevant, because, in light of the lack
of success to date of your efforts to find funding (about which
the JVOC has no comment), MSD will almost certainly cease
to be a viable competitor in its field. Thus, MSD is not put in
a worse position by granting the Consents. In addition,
assuming (but not conceding) that Roche‘s rights under the
new licensing arrangement are broader than the rights under
the 1992 License, the JVOC believes that IGEN would be
able to license these ―broader‖ rights to other competitors of
MSD without violating MSD‘s exclusive license to utilize the
Research Technologies in the Diagnostic Field.65
Nowhere in the July 18 memo does the JVOC state that MSD or MST is granting Roche
a license.66
On July 20, 2003, the JVOC sent another memo to Wohlstadter. This memo
expressed frustration that Wohlstadter had ―chosen to raise [his] points at the eleventh
hour after leading the JVOC, IGEN, and Roche to believe for over five months that [he
was] agreeable to the NEWCO structure, which would keep in place all prior
65
Id. at MESO00006197.
66
The JVOC‘s memo also notes that the proposed transaction ―guarantees MSD‘s
freedom to operate in its field in the future without interference from Roche.‖ Id.
Furthermore, the evidence shows that the ―field‖ being referred to here is multi-
array technology. For example, the July 18 memo was a response to
Wohlstadter‘s July 16 memo in which he expressed concern that ―the new license
from NEWCO‖ would ―introduce[] a great degree of ambiguity with respect to
MSD‘s exclusivity in multi-array.‖ JTX 210 ¶ 2. Additionally, Robert Salsmans,
Chairman of the JVOC, testified credibly that the JVOC was referring to multi-
array technology in the memo. See Tr. 1005 (Q: Okay. What field are you
talking about here? A: Well, the -- the scope, the joint -- of the joint venture
being, again, single electrodes, multi[-]array technology.).
20
understandings without change.‖67 The memo noted further that ―the JVOC permitted
[Wohlstadter] to assist IGEN in its negotiations with Roche,‖ on the basis of his
professed amenability to the proposed transaction between IGEN and Roche.68
Notwithstanding their displeasure with Wohlstadter, the JVOC represented that IGEN
and BioVeris would commit to providing MSD with $30 million in funding if
Wohlstadter agreed to provide the requested consents.
The next day Wohlstadter responded with his final counteroffer. In that letter, he
asserted that, ―MST has made enormous concessions in these negotiations, yielding to
virtually all of [the JVOC‘s] demands,‖ and demanded $37.5 million in exchange for his
consents.69 Although the JVOC acquiesced to Wohlstadter‘s funding demand, that
decision appears to have been motivated primarily by a desire to preserve the proposed
$1.2 billion transaction between IGEN and Roche, and not by any belief that Wohlstadter
67
JTX 225 at MESO00017399. This was not the first time the JVOC encountered
difficulty in dealing with Wohlstadter. Salsmans testified, without challenge, that
in the negotiations surrounding the 2001 amendment of the joint venture
agreement between IGEN and MST, it was ―extremely difficult to do business, to
come to conclusions, to come to an agreement with Jacob Wohlstadter. . . . We
would have discussions. He would agree. . . . The next day you would receive --
or two days later you would receive a confirmation of that agreement, but that
confirmation would be completely different from the things that we had agreed
on.‖ Tr. 996–97. Salsmans testified further that Wohlstadter‘s penchant for
making ―additional demands or new versions,‖ ―didn‘t happen one time.‖ Nor did
that ―happen twice, but that happened a lot of times and that happened not only in
these discussions [in 2001] but it happened, also, in discussions that we had at a
later stage in 2003 in the framework of the IGEN-Roche agreements.‖ Id. at 997.
68
JTX 225 at MESO00017399.
69
JTX 232 at MESO00007165-66.
21
was correct on the ―merits.‖ Moreover, IGEN only agreed to provide MSD with $30
million of funding. The remaining $7.5 million came via a personal investment from
Wohlstadter‘s father, Samuel Wohlstadter.70
7. The 2003 transaction
On July 21, 2003, the investment bank Lehman Brothers reviewed the proposed
transaction between IGEN and Roche with IGEN‘s board and delivered a presentation
―discuss[ing] methods of valuing the component parts of IGEN‘s business as well as the
financial implications to IGEN shareholders of the proposed transaction.‖71 At this time,
MSD would have acquired whatever ―springing rights‖ it might have sought to claim as a
result of IGEN‘s July 9, 2003 notice that it was terminating the 1992 License.
Nevertheless, for purposes of its analysis, Lehman Brothers did not ascribe any value to
IGEN‘s stake in MSD.72
On July 24, 2003, IGEN‘s board held a special meeting to consider the proposed
transaction ―between [IGEN], on the one hand, and [Roche], on the other hand, whereby
Roche would acquire [IGEN] and simultaneously [IGEN] would distribute to its
stockholders shares of a new company ([BioVeris]) holding certain of [IGEN‘s] assets
and liabilities.‖73 The IGEN board was informed that the JVOC had succeeded in
70
JTX 261.
71
JTX 228 at BV0004315.
72
Id. at BV0004332.
73
JTX 249 at BV0054366.
22
―obtaining the consents of MSD and MST to the [p]roposed [t]ransaction.‖ There was no
discussion, however, about Meso participating in the transaction as a licensor.74 After
hearing presentations from their financial and legal advisors, the IGEN board voted
unanimously to approve the transaction with Roche and to ―adopt the resolutions subject
to final confirmation by MST‘s counsel that it is satisfied with the documentation in
connection with the [p]roposed [t]ransaction.‖75
Later that day, IGEN and Roche consummated their complex transaction, which
was memorialized in approximately 145 documents.76 MSD and MST were signatories
to five of those documents.77 As a result of the transaction, IGEN‘s shareholders
received shares in BioVeris and over $1 billion in cash from Roche. In addition, IGEN
agreed to provide MSD with $37.5 million in funding. None of the documents called for
Roche to pay, nor did Roche pay, any compensation to MSD.
8. The 2003 License Agreement
The document most relevant to this litigation is the license agreement that IGEN
and Roche executed as part of the overall 2003 transaction (the ―License Agreement‖ or
―2003 License Agreement‖). The License Agreement identifies two ―Parties,‖ IGEN and
74
Id.
75
Id. at BV0054369.
76
JTX 287.
77
These documents were: (1) the Global Consent and Agreement (JTX 258); (2) the
Joinder to the Ongoing Litigation Agreement (JTX 257); (3) the Covenants Not to
Sue (JTX 265); (4) a July 24, 2003 Letter Agreement (JTX 260); and (5) the
Consent to the 2003 License Agreement (JTX 263).
23
Roche,78 and defines the term ―Affiliates‖ to exclude specifically MSD and MST.79
Section 2.1 of the agreement, entitled License Grant, states:
During the term of this Agreement, and subject to the terms
and conditions of this Agreement, IGEN and its Affiliates
grant to [Roche], only for use in the Field, an irrevocable,
perpetual, Non-Exclusive, worldwide, fully-paid, royalty-free
right and license under the Licensed ECL Technology, to
develop, have developed, prepare derivative works based on,
reproduce, use, manufacture, have manufactured, distribute,
have distributed, display, perform, modify, import, sell, offer
for sale, have sold, lease and otherwise commercially exploit
Products.80
The agreement defines ―Licensed ECL Technology‖ as ―ECL Patent Rights81 and
any and all proprietary or confidential or technical information relating to ECL
Technology owned by IGEN or any of its Affiliates or licensed to IGEN or any of its
Affiliates from a third party with the right to grant the licenses under Section 2.1
hereof.‖82
78
JTX 263 at ROCHE0055861. Technically, IGEN‘s counterparty was IGEN LS
LLC, an entity formed for the purpose of effectuating the License Agreement. It is
undisputed that, for purposes of Plaintiffs‘ claims, IGEN LS LLC and Roche may
be used interchangeably.
79
Id.
80
Id. at ROCHE0055867.
81
This term essentially refers to a 27-page list of ECL-related patents owned or
controlled by IGEN and its Affiliates attached as Exhibit A to the License
Agreement. Id. at ROCHE0055890-917.
82
Id. at ROCHE0055866.
24
The term ―Products‖ is defined to exclude expressly ―Multi-Array‖ technologies,
meaning that the License Agreement generally did not grant Roche any right to, for
example, make or sell products of the multi-array kind produced by Meso.
In Section 2.6, Roche ―covenant[ed] that it w[ould] not, under any circumstances,
actively advertise or market the Products in fields other than those included in the
Field.‖83 As its General Counsel, Gottlieb Keller, acknowledged, Roche knew that the
License Agreement did not sanction the intentional sale of Products outside of the Field.84
Regarding unintentional or unknowing sales of Products outside of the Field, the License
Agreement addressed that issue in two separate provisions. Section 2.5(a) provides for
both sides (i.e., Roche and IGEN) to agree annually on an independent third-party to
monitor Roche‘s compliance with the License Agreement (the ―Field Monitor‖). 85 Under
Section 2.5(b), Roche undertook to pay IGEN 65% of all ―undisputed revenues earned
83
Id. at ROCHE0055870. The ―Field‖ is defined as ―analyzing . . . specimens taken
from a human body, including without limitation, blood, bodily fluid or tissue, for
the purpose of testing, with respect to that human being, for a physiological or
pathological state, a congenital abnormality, safety and compatibility of a
treatment or to monitor therapeutic measures.‖ Id. at ROCHE0055865.
84
See, e.g., Tr. 780 (Keller) (―THE COURT: And was it your understanding that
Roche had a license from BioVeris in the 2003 license to operate intentionally
outside that field? THE WITNESS: No, definitely not intentionally.‖). This also
is supported by the fact that the License Agreement required Roche to sell or place
Products only with customers it ―reasonably believed‖ would use the Products in
the ―Field.‖ JTX 263 at ROCHE0055869.
85
JTX 263 at ROCHE0055869.
25
through out-of-Field sales of Products for the prior year‖ identified by the Field
Monitor.86 There is no mention of Meso in either Section 2.5(a) or (b).
Finally, the License Agreement also included a ―Consent By Meso Scale
Diagnostics, LLC. And Meso Scale Technologies LLC.‖ In this document, located on a
separate page after the Roche and IGEN signature blocks, MSD and MST ―consent[ed] to
the foregoing License Agreement dated as of July 24, 2003‖ and ―consent[ed] to and
join[ed] in the licenses granted to [Roche] in the License Agreement.‖87
9. Meso acquires BioVeris’s interest in MSD
On February 13, 2004, the 2003 transaction closed, terminating the joint venture
between IGEN and MST, and causing BioVeris to assume IGEN‘s 31% interest in MSD.
Shortly thereafter, MST exercised its right to buy out BioVeris‘s ownership in MSD, a
process that was completed in December 2004.88 As part of MST‘s buyout of BioVeris‘s
stake in MSD, three appraisers, Wilamette Management Associates (―Wilamette‖),
Houlihan Lokey Howard & Zukin (―Houlihan‖), and Erickson Partners LLC
(―Erickson‖), were retained to value MSD. As part of the appraisal process, MSD was
asked to provide, among other things, lists of its intellectual property and of its key
86
Id. This 65% figure was designed to prevent Roche from profiting from out-of-
Field sales. See Tr. 1052 (Nuechterlein) (stating that the ―65 percent royalty‖
―would essentially turn over the profit from those sales to [IGEN].‖).
87
JTX 263 at ROCHE0055887.
88
JTX 601 at 9.
26
agreements. During that process MSD never identified itself as a licensor under the 2003
License Agreement.
10. The Field Monitor process and out-of-Field sales
After the 2003 transaction closed, Roche undertook several measures to attempt to
ensure its compliance with the Field limitations delineated in the 2003 License
Agreement. These measures included providing certain training to its sales staff and
placing the requisite labels on its products and instruments. In October 2004, Roche
invited BioVeris to participate in the Field Monitor process, but BioVeris did not
respond. In October 2005, Roche issued a similar invitation to BioVeris again. By this
time, BioVeris suspected that ―Roche was selling ECL products to customers who were
using the products outside the permitted field of use.‖89 Accordingly, BioVeris accepted
Roche‘s invitation, and in early 2006, the two sides began the Field Monitor process.
Between 2004 and 2006, Meso had no contact with Roche. On June 16, 2006,
Wohlstadter and Meso learned for the first time from BioVeris‘s public filings that an
issue potentially existed regarding Roche selling out of Field.90 There is no evidence that
either of them had taken any affirmative steps to monitor Roche‘s sales before then.
After learning of the potential issue, Meso neither demanded that Roche stop selling out-
of-Field nor did it participate in the Field Monitor process. Instead, Meso remained a
passive observer as BioVeris asserted its enforcement rights under Section 2.5 of the
89
JTX 489 at 17.
90
Tr. 141 (Wohlstadter).
27
License Agreement. Meso took this relatively passive approach even though its joint
venture agreement with IGEN had terminated when the 2003 transaction closed, and,
thus, its interests were not as strongly aligned with BioVeris as they had been with IGEN
before the 2003 transaction.
As BioVeris and Roche worked to determine the scope of Roche‘s liability for
inadvertent out-of-Field sales, the two sides began discussing a number of possible
solutions to their dispute. One such solution proposed by BioVeris as early as July 2006
was for Roche to acquire BioVeris.91 Another structure Roche and BioVeris considered
was an expansion of the 2003 License Agreement. On October 2, 2006, Roche sent
BioVeris a draft agreement that would provide Roche with ―an expanded license for ECL
technology unencumbered by product or field limitations.‖92 Similar to the 2003 License
Agreement, the definition of ―Parties‖ in the proposed expanded license did not include
either MSD or MST, and MSD and MST would be asked to ―consent to and join in the
licenses, waivers, and releases‖ that BioVeris would be granting to Roche in the
expanded license.93
The record shows that between October 2006 and March 2007, BioVeris and
Roche engaged in a ―dual track‖ process in which both sides considered simultaneously
the possibility of Roche either acquiring BioVeris or receiving an expanded license
91
Id. Roche first indicated it would consider acquiring BioVeris in September 2006.
92
JTX 382 at FL0047929.
93
Id. at FL0047949.
28
related to ECL technology. For example, in late December 2006, Roche made a
―preliminary non-binding proposal‖ to acquire all of BioVeris for $400.7 million.94 In
early January 2007, however, Roche asked BioVeris to enter into a letter agreement with
MSD and MST in which the Meso entities would limit their rights to restrict BioVeris‘s
―exercise of the Licensed ECL Technology,‖ as defined in the License Agreement.95
On February 27, 2007, BioVeris informed Roche that if it wanted BioVeris to
modify its relationship with MSD, Roche should negotiate those changes directly with
MSD. This led Roche‘s outside counsel to conduct additional diligence on MSD.96
Thereafter, on March 8, 2007, Roche informed BioVeris ―that, for the time being, Roche
was willing to proceed with [an acquisition of BioVeris] without obtaining modifications
with MSD.‖97
Roche‘s about-face with respect to the need to involve Meso in its acquisition of
BioVeris appears to have been driven primarily by four factors. First, BioVeris then was
selling its ―M-Series‖ instruments for out-of-Field uses without any challenge or
94
JTX 489 at 18.
95
JTX 422 at FL0012486. In later correspondence, Roche described the proposed
letter agreement as a ―key document‖ because ―Roche will be able to achieve
freedom to operate only with such a resolution with MSD.‖ JTX 439 at
ROCHE0030613.
96
JTX 492 at ROCHE0100788. This additional diligence, however, appears to have
been limited to two lawyers spending a single day reviewing Meso‘s research
summaries.
97
Id.
29
objection from Meso.98 These instruments used the same single-cell, permanent
electrode ECL technology that BioVeris had licensed to Roche in the License Agreement.
Second, the Research Program that potentially could be the source of ―growing rights‖
for MSD had terminated with the joint venture in 2004, thus providing a clear limitation
on the rights MSD might procure through that component of the 1995 License.99 Third,
BioVeris had represented to Roche that, even if Roche acquired BioVeris, MSD did not
have any rights that would interfere with the deal they were contemplating.100 Finally,
notwithstanding its less-than-exhaustive review of MSD‘s research summaries, Roche
considered those summaries sufficiently complete that it was confident that it could
achieve its goals regarding access to the necessary ECL technology by acquiring
BioVeris without involving Meso at all.
On April 4, 2007, about a month after Roche informed BioVeris that it was
prepared to go ahead with a deal without Meso, the two sides announced jointly that
Roche had agreed to acquire BioVeris for $599 million.101
11. Roche and Meso’s interactions after the BioVeris transaction
Wohlstadter learned that Roche would be acquiring BioVeris by way of a phone
call from IGEN executives on the morning of April 4, 2007.102 Wohlstadter was ―very
98
JTX 364 at BV0021346. One of these uses was for clinical trials. Id.
99
JTX 48 at MESO00053171, MESO00053202; JTX 260 at ROCHE0056136.
100
JTX 443 at FL0012843, FL0012846.
101
JTX 476.
30
upset‖ that the two sides were executing a deal without him and Meso. Nevertheless,
neither he nor Meso took any action to attempt to stop the deal from closing. Rather,
between June 20 and June 22, 2007, Wohlstadter wrote three letters to Roche seeking
assurances that Roche would honor BioVeris‘s contractual commitments to Meso.103
Notably, however, none of these letters specifically referred to the 2003 License
Agreement, nor did they purport to challenge the pending deal between Roche and
BioVeris.
On June 26, 2007, Roche‘s acquisition of BioVeris closed.104 Effective the same
date, BioVeris granted its new owner, Roche, a non-exclusive license to the Licensed
ECL Technology ―for use in any and all fields‖ subject to ―the rights of MSD, MST, and
Jacob Wohlstadter under all pre-existing agreements.‖105
After the acquisition closed, Meso and Roche engaged in a series of negotiations
about a number of issues arising from the acquisition. These negotiations included
meetings, either in person or telephonically, in July, August, October, and December of
2007, as well as January, March, April, and December 2008. Indeed, by as late as April
2009, Meso and Roche still were attempting to reach a mutually acceptable resolution to
102
Tr. 151–52 (Wohlstadter).
103
JTX 509.
104
JTX 520 at 2.
105
JTX 514 § 2.1.
31
their dispute.106 Eventually, however, Roche informed Meso that it had no intention of
settling the dispute. Plaintiffs then commenced this litigation.
C. Procedural History
Plaintiffs initiated this action on June 22, 2010 by filing their verified complaint
(the ―Complaint‖). In the Complaint, Plaintiffs asserted causes of action for breach of the
Global Consent (Count I) and breach of the License Agreement (Count II), seeking both
monetary and equitable relief. On September 2, 2010, Defendants moved to dismiss the
Complaint in its entirety. I denied that motion in an April 8, 2011 Memorandum
Opinion,107 but ordered that the prosecution of Count II be stayed pending a decision by a
New York arbitration panel on whether Plaintiffs had standing to demand that the claims
in that count be arbitrated. In April and May 2012, the arbitration panel heard testimony
from eight witnesses over four days. On September 10, 2012, the arbitration panel
concluded that Meso's claim for breach of the License Agreement was not arbitrable.
After full discovery, on September 17, 2012, Defendants moved for summary
judgment on both counts in the Complaint. At argument on Defendants‘ motion on
November 5, 2012, I confirmed the arbitration panel‘s final award and lifted the stay as to
Count II. As to Count I, Defendants argued that Roche‘s acquisition of BioVeris did not
breach the terms of the Global Consent and that that count of the Complaint was time-
106
JTX 572.
107
Meso Scale Diagnostics v. Roche Diagnostics GmbH, 2011 WL 1348438, *19
(Del. Ch. Apr. 8, 2011).
32
barred. Regarding Count II, Defendants continued to assert that Plaintiffs are not
―Parties‖ to the 2003 License Agreement, and, thus, have no standing to enforce its
provisions. In a Memorandum Opinion entered on February 22, 2013,108 I granted
Defendants‘ motion for summary judgment as to Count I, but denied it as to Count II on
the grounds that the phrase ―join in the licenses granted‖ in the consent attached to the
License Agreement is ambiguous as to whether it makes Plaintiffs parties to the License
Agreement.
From February 25 through March 1, 2013, I presided over a five-day trial on
Count II. After post-trial briefing, counsel presented their final arguments on November
8, 2013. This Memorandum Opinion constitutes my post-trial findings of fact and
conclusions of law in this matter.
D. Parties’ Contentions
Meso argues that the plain meaning of its agreement to ―join in‖ the licenses
granted to Roche in the 2003 License Agreement makes it a party to that agreement with
corresponding rights to enforce its terms. Meso avers further that, even if it is not
considered a party to the License Agreement based on the plain meaning of the consent,
the parol evidence presented at trial establishes that it, Roche, and IGEN intended to have
Meso license its ECL rights to Roche and become a party to the License Agreement.
Alternatively, Meso asserts that if it is not a party to the entire License Agreement, the
108
Meso Scale Diagnostics v. Roche Diagnostics GmbH, 62 A.3d 62, 88 (Del. Ch.
2013).
33
evidence shows that, at a minimum, it is a party to Article 2, which contains the
provisions of the License Agreement Meso seeks to enforce through this litigation.
According to Meso, Defendants have failed to offer any reasonable competing
interpretation of the consent that would preclude a finding that it is a party to the License
Agreement. Regarding remedies for Defendants‘ alleged breach of the License
Agreement, Meso argues that it is entitled to both specific performance of the License
Agreement‘s Field restrictions and Field Monitor provisions as well as monetary
damages. The monetary damages would apply, at a minimum, to Roche‘s intentional
out-of-Field sales since 2007. According to Meso, those damages could be as high as
$436 million.
In response, Defendants deny that Plaintiffs are, or ever have been, parties to the
2003 License Agreement and, thus, maintain that Plaintiffs have no standing to enforce
its provisions. Defendants contend that the phrase ―join in‖ does not have a singular
meaning under New York law that automatically would make Plaintiffs parties to the
License Agreement. Moreover, Defendants assert that parol evidence, including, for
example, the drafting history of the License Agreement and the course of dealing
between Plaintiffs and Defendants after 2003, supports their interpretation of the
agreement as not including Plaintiffs as parties. Defendants also make an alternative
argument regarding Article 2 of the License Agreement. According to Defendants, to the
extent Meso ―joined in‖ the License Agreement at all, they joined only the licenses
granted in Article 2 and none of the covenants in that Article that Meso now seeks to
enforce. Stated differently, Defendants aver that, at most, Meso granted Roche certain
34
rights, but did so without obtaining any corresponding enforcement rights in return. As
to potential remedies, Defendants argue that, to the extent they are liable for breach of
contract, Meso only is entitled to nominal damages.
II. ANALYSIS
Both sides in this dispute agree that Meso‘s breach of contract claim is governed
by New York law. Thus, the focus of this litigation is whether, under New York law,
Roche is liable to Meso for breaching the terms of the License Agreement. I address that
question next.
A. Legal Standard
To prevail on a claim for breach of contract, a plaintiff must prove by a
preponderance of the evidence ―the formation of a contract, performance by the plaintiff,
breach and resulting damage.‖109 In this litigation, the key inquiry pertains to the first
element: did Meso become a party to the License Agreement by virtue of the ―join in‖
language in the consent?110 The two sides have advanced competing constructions of the
―join in‖ language and have asked this Court to interpret the License Agreement to
determine which side‘s construction is more reasonable.
109
McCormick v. Favreau, 919 N.Y.S.2d 572, 577 (App. Div. 2011).
110
Section 14.11 of the License Agreement, entitled ―No Third Party Beneficiary
Rights,‖ states in relevant part that ―nothing in this Agreement is intended to
confer upon any person other than the Parties hereto and their respective
successors and permitted assigns, any benefit, right, or remedy under or by reason
of this Agreement.‖ JTX 263 § 14.11 at ROCHE0055885. Meso has not argued,
nor could it argue, that it has any right to enforce the License Agreement in any
capacity other than as a party.
35
Under New York law, ―[t]he fundamental, neutral precept of contract
interpretation is that agreements are construed in accord with the parties‘ intent.‖111
Because the written agreement itself is the best evidence of the parties‘ intent, ―a written
agreement that is complete, clear and unambiguous on its face must be enforced
according to the plain meaning of its terms.‖112 A contract is unambiguous if the
language it uses has ―a definite and precise meaning, unattended by danger of
misconception in the purport of the [agreement] itself, and concerning which there is no
reasonable basis for a difference of opinion.‖113 ―Further, a contract should be ‗read as a
whole, and every part will be interpreted with reference to the whole; and if possible it
will be so interpreted as to give effect to its general purpose.‘‖114 In that regard, ―[t]he
meaning of a writing may be distorted where undue force is given to single words or
phrases.‖115 ―Parol evidence—evidence outside the four corners of the document—is
admissible only if a court finds an ambiguity in the contract.‖116
111
Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (N.Y. 2002).
112
Id.
113
Id. (quoting Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355 (N.Y. 1978)).
114
Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 324 (N.Y. 2007) (quoting
Westmoreland Coal Co. v. Entech, Inc., 100 N.Y.2d 352, 358 (N.Y. 2003)).
115
Westmoreland Coal Co., 100 N.Y.2d at 358.
116
Schron v. Troutman Sanders LLP, 20 N.Y.3d 430, 436 (N.Y. 2013). Parol
evidence includes, but is not limited to, the parties‘ negotiating history and earlier
drafts of the agreement that requires interpretation.
36
B. Meso is Not a Party to the Entire License Agreement
Throughout this litigation, Meso has argued that it is a party to the License
Agreement by virtue of the ―join in‖ language in the consent attached to that agreement.
As an initial matter, I note that Meso did not ―join in‖ the License Agreement in its
entirety. It only ―consented‖ to the License Agreement as a whole, and ―join[ed] in the
licenses granted . . . in the License Agreement.‖117 Thus, even assuming that the phrase
―join in‖ is sufficient to make Meso a party to the License Agreement, I find
unpersuasive Meso‘s assertion that that phrase makes them a party to the entire License
Agreement when the phrase was used only to describe Meso‘s relationship with the
―licenses granted,‖ and specifically was not utilized to explain Meso‘s status relative to
the License Agreement as a whole.118
117
JTX 263 at ROCHE0055887.
118
Meso argues that because the ―License Grant‖ in Section 2.1 makes the licenses
granted ―subject to the terms and conditions of this Agreement,‖ that by ―joining
in‖ the licenses granted, Meso, in effect, joined in the entire License Agreement.
One flaw with this interpretation of the ―join in‖ phrase is that it arguably renders
Meso‘s ―consent to‖ the License Agreement superfluous. If Meso ―joined in‖ the
entire License Agreement as a party, its additional ―consent to‖ the agreement
would be meaningless because it already would have expressed its acceptance of
the License Agreement by becoming a party to each of its provisions. Thus, the
License Agreement arguably is ambiguous as to whether ―join[ing] in the licenses
granted‖ is equivalent to ―joining in‖ the entire agreement. Any ambiguity in that
regard, however, was resolved by the decision of the arbitration panel, which I
discuss next.
37
It is of great significance, however, that the arbitration panel already has
determined that Meso is not a party to at least one section of the License Agreement.
Section 6.2(b) of the License Agreement states that:
Any dispute or other matter in question between [Roche] and
IGEN arising out of or relating to the formation,
interpretation, performance, or breach of this Agreement,
whether such dispute or matter arises before or after
termination of this Agreement, shall be resolved solely by
arbitration if the Parties are unable to resolve the dispute
through negotiation pursuant to Section 6.1 hereof.119
Meso litigated before an arbitration panel the issue of whether it was a party to the
License Agreement in the sense that it had a corresponding right to invoke Section 6.2 of
the agreement for purposes of resolving its breach of contract claim (i.e., Count II of the
Complaint) against Roche. As noted in this Court‘s February 22, 2013 decision
regarding Roche‘s motion for summary judgment,
[t]he Arbitration Panel was tasked with determining whether
or not the dispute as to Count II was arbitrable. The Panel
ultimately determined that they did not have jurisdiction to
hear the [breach of the License Agreement] claims. They
based that determination, at least in part, on a finding that
when MSD and MST consented to and ―join[ed] in the
licenses granted‖ in the [License Agreement], they did not
also become parties to the arbitration provision in that
agreement. That finding is entitled to issue-preclusive effect
here.120
119
Id. at ROCHE0055871-72.
120
Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, 62 A.3d 62, 90 (Del.
Ch. 2013) (emphasis added). There has been no showing that this determination
was clearly erroneous or that there has been an important change in circumstances
that would warrant a different outcome. As such, my conclusion as to the
preclusive effect of the arbitration panel‘s decision is law of the case. See
38
Therefore, at a minimum, it has been determined conclusively that Meso is not a
party to Section 6.2 of the License Agreement, and, thus, it is not a party to the entire
License Agreement. That determination, however, is not dispositive as to Meso‘s claims
here because ―the promises Meso seeks to enforce are found in §§ 2.5 and 2.6‖ of the
License Agreement.121 Accordingly, although Meso is not a party to the entire License
Agreement, I still must consider whether Meso is a party to some or all of Article 2 and
has the right to enforce Sections 2.5 and 2.6.
C. Whether Meso is a Party to Any Part or All of Article 2 is Ambiguous
Meso and Roche agree that, in the phrase ―consent to and join in the licenses
granted‖ used in the consent attached to the License Agreement, the terms ―consent to‖
and ―join in‖ have different meanings.122 Meso avers, however, that by agreeing to ―join
in the licenses granted‖ it became a party to all of Article 2 of the License Agreement and
Hamilton v. State, 831 A.2d 881, 889 (Del. 2003) (―The prior rulings of a court
must stand unless those rulings were clearly in error or there has been an
important change in circumstance.‖) (internal quotations and citations omitted).
121
Pls.‘ Opening Br. 31. In that regard, the arbitration panel did not make any
determination entitled to issue-preclusive effect in this litigation as to whether
Meso was a party to any part of the License Agreement other than Section 6.2.
Meso Scale Diagnostics, 62 A.3d at 90.
122
This is consistent with the ―presumption against surplusage,‖ a recognized canon
of contract construction under New York law. See Olin Corp. v. Am. Home
Assurance Co., 704 F.3d 89, 99 (2d Cir. 2012) (quoting LaSalle Bank Nat’l Ass’n
v. Nomura Asset Capital Corp., 424 F.3d 195, 206 (2d Cir. 2005) (―Any
interpretation of a contract that ‗has the effect of rendering at least one clause
superfluous or meaningless . . . is not preferred and will be avoided if possible.‘‖).
39
obtained corresponding enforcement rights. Roche disagrees. In support of its argument,
Meso cites case law supporting the proposition that ―one who joins in a contract between
two other parties by assuming obligations under that contract becomes a party with the
same corresponding rights and obligations as the other parties.‖ 123 In response, Roche
contends that ―the most reasonable construction [of ‗join in‘] is that the term was
intended to mean something more than mere consent but less than becoming a party and
obtaining enforcement rights.‖124 This interpretation, according to Roche, comports with
the terms of the License Agreement as a whole, which contemplates IGEN being Roche‘s
sole licensor of ECL Technology. Roche asserts further that, to the extent Meso is a
party to the License Agreement, it only is a party to the license grant provisions, Sections
2.1 and 2.7, and has no rights to enforce the terms of Sections 2.5 and 2.6.
The Court‘s first task in resolving the disparity between the competing
interpretations of the License Agreement advanced by Meso and Roche is to decide
whether the relevant language of the License Agreement is ambiguous. In ruling on
Roche‘s motion for summary judgment, I held explicitly that ―the meaning of the ‗join in
the licenses granted‘ language‖ in the consent ―attached to the [License Agreement] is
ambiguous,‖ and that ―it will be necessary to consider extrinsic evidence on the question
123
Pls.‘ Opening Br. 22–23.
124
Defs.‘ Opening Br. 26.
40
of MSD and MST‘s ability to enforce the License Agreement.‖125 Based on the evidence
and arguments presented at trial, I adhere to that prior holding.
Initially, I note that the term ―join in‖ does not appear to have a singular meaning
under New York law.126 In addition, neither side to this dispute has presented evidence
that ―join in‖ is a term of art with a specific meaning in the context of this litigation.127
Nevertheless, relying heavily on a decision of the United Stated District Court for the
District of Columbia in Institut Pasteur v. Chiron Corp.,128 Meso argues that based on the
―join in‖ language, it is, as a matter of law, a party to at least Article 2 of the License
Agreement. I disagree.
In Institut Pasteur, the issue before the District Court was whether Institut Pasteur
was bound by an arbitration agreement in a 1993 cross-license agreement that it had
signed. Although the preface of the cross-license did not list Institut Pasteur as one of the
125
Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, 62 A.3d 62, 93 (Del.
Ch. 2013).
126
See, e.g., New York Cent. R. Co. v. New York, N.H. & H.R. Co., 208 N.Y.S.2d 605,
616 (N.Y. Sup. Ct. 1960), modified, 216 N.Y.S.2d 928 (N.Y. App. Div. 1961)
(recognizing that although based on the facts of the case ―[t]he court need not
explore the countless varied associations in which the phrase [‗to join‘] might be
used, nor conjecture the varied possibilities of its significance,‖ ―‗to join‘ may be
passive in significance or it may denote active participation in formulation of an
activity.‖).
127
In fact, there was no evidence presented at trial that any of Meso, IGEN, or Roche
ever had any discussions, oral or written, regarding the meaning of ―join in‖
during the negotiations that led up to the 2003 transaction.
128
2005 WL 366968 (D.D.C. Feb. 16, 2005).
41
entities which the agreement was ―made by and among,‖ the preface concluded with a
statement that Institut Pasteur ―joins in this Agreement for the purposes set forth
herein.‖129 The body of the agreement itself contained numerous specific references to
Institut Pasteur, which the District Court found gave ―rise to clear rights and obligations
on the part of Institut Pasteur.‖130 In addition, Institut Pasteur signed the cross-license
agreement in the same place in the document as the other ―parties‖ to the agreement.131
In a post-trial decision, the court in Institut Pasteur, after considering extensive
parol evidence, found that Institut Pasteur was a party to the cross-license agreement and
was bound by its arbitration provision. One of several factors relied on by the Institut
Pasteur court in reaching that conclusion was that Institut Pasteur had assumed a number
of obligations within the body of the cross-license agreement itself. 132 In that context,
the District Court stated that ―[t]here is no authority for the notion that an individual or
129
Id. at *2.
130
Id. at *10.
131
Id. at *3. The only difference between Institut Pasteur‘s signature block and the
other signature blocks was that it had the phrase ―For Approval and as to Section
2.8‖ written above it. Id.
132
The court in Institut Pasteur also noted, among other things, that: (1) Institut
Pasteur‘s signature appeared in the agreement itself, under language reading ―the
parties have duly executed this Agreement on the date(s) written below; (2)
Institut Pasteur was involved with the negotiations of the cross-license agreement
from the inception of the negotiations and was involved specifically in
negotiations surrounding the arbitration provision; and (3) Institut Pasteur had
described itself as a party to the cross-license agreement in at least one
communication with another party to the agreement after its execution.
42
company can ‗join in‘ a contract—at least in the sense of assuming obligations directly
under the contract—in some capacity other than as a party.‖133
Institut Pasteur does not compel the conclusion that Meso unambiguously is a
party to the License Agreement. I note, for example, that the ―join in‖ language in
Institut Pasteur arguably was more definitive than the analogous language in this case.
Furthermore, Institut Pasteur was mentioned numerous times in the body of the
agreement at issue, and Institut Pasteur signed the agreement in the same manner as the
other ―parties‖ to that agreement. Nevertheless, the court still found the agreement
ambiguous and, therefore, considered parol evidence. The textual support for Meso‘s
argument that it is a party to the License Agreement is not nearly as strong as it was for
the plaintiff in Institut Pasteur. Thus, the need to consider parol evidence in this
litigation is manifest. Moreover, it is unclear what, if any, obligations Meso assumed
―directly under the‖ License Agreement by agreeing to ―join in‖ the licenses granted
thereunder. In Institut Pasteur, the cross-license agreement explicitly referenced Institut
Pasteur‘s obligations. In this case, Meso‘s ―obligations‖ are contained in a separately
executed ―consent‖ attached to the License Agreement. Contrary to Meso‘s assertions
otherwise,134 I consider that fact a relevant distinction.
133
Institut Pasteur, 2005 WL 366968 at *11.
134
Meso cites the case of Jasper v. Bovina Music, Inc., 314 F.3d 42 (2d Cir. 2002), in
support of its argument that it is irrelevant that Meso signed the consent and not
the License Agreement itself. In Jasper, certain individuals were deemed
signatories to a contract between other parties based on their having executed an
―addendum‖ to that contract which stated that the individuals signing the
43
In addition, the License Agreement not only specifies that it is ―by and between‖
IGEN and Roche, but also goes further to define the ―Parties‖ as IGEN and Roche. Meso
does not appear in the body of the License Agreement in any meaningful way, and it
signed a ―consent‖ that was attached to the License Agreement, not the agreement
itself.135 Furthermore, other than the ―join in‖ reference, the consent here is devoid of
language suggesting that Meso is a party to or bound by the License Agreement. Based
addendum ―assent[ed] to the execution of [the] agreement and agree[d] to be
bound by the terms and conditions thereof.‖ Id. at 45–46. The consent signed by
Meso is readily distinguishable from the ―addendum‖ in Jasper, because the
consent lacks clear and unequivocal language that Meso is agreeing to be ―bound
by the terms and conditions‖ of the License Agreement as a party.
135
In that regard, this case also is distinguishable from Digene Corp. v. Ventana Med.
Sys., Inc., 316 F. Supp. 2d 174 (D. Del. 2004). In Digene, another post-trial
decision in which parol evidence was utilized to interpret a contract, the court
recognized that ―New York law has long held that a signatory may be bound by,
and thus a party to, a contract, even though the signatory is not named as a party in
the body of the contract.‖ Id. at 183. On that basis, in conjunction with certain
judicial admissions made by one of the parties and the parties‘ course of conduct
after execution of the agreement at issue, the court in Digene found that a
signatory to the agreement itself was a party to that agreement despite not being
named as such in the body of the contract. Therefore, Digene holds only that a
signatory may be a party to a contract even if it is not identified as such in the
agreement itself, not that, in general, it must be a party or even that it likely will be
a party. As it pertains to this litigation specifically, I note that Meso signed an
attached consent, not the License Agreement itself. Furthermore, Digene has been
distinguished by at least one court, which held that a more accurate statement of
New York law is that ―where a third party merely annexes his name to a contract
in the body of which he is not mentioned, and which is a complete contract
between other parties signing it and mentioned in it, such third person does not
thereby become a party to the efficient and operative parts of the contract, his
signature in such case being only an expression of assent to the act of the parties
making the contract.‖ In re Palmdale Hills Prop., 2011 WL 7478771, at *7
(Bankr. C.D. Cal. Nov. 3, 2011) (quoting In re Wirth, 355 B.R. 60, 63-64 (N.D.
Ill. 2005)).
44
on these facts, one reasonable construction of the consent to the License Agreement is
that Meso, consistent with Roche‘s interpretation of the consent, never became a party to
the License Agreement by virtue of ―joining in‖ the licenses that were being granted. On
the other hand, based on the case law that Meso has cited and the lack of clarity in some
of the contractual language in dispute, I cannot say from the four corners of the consent
and other relevant documents that Meso‘s claim to being a party to the License
Agreement is necessarily unreasonable. Therefore, because the consent to the License
Agreement is ambiguous as to whether it makes Meso, in any way, a party to the License
Agreement, I must analyze the relevant documents and related parol evidence to resolve
that ambiguity and determine the most reasonable interpretation of the consent.
D. The Drafting History of the License Agreement Supports the Conclusion
that Meso Did Not Become A Party To the License Agreement Through the
“Join In” Language in the Consent
Before turning to the drafting history of the License Agreement itself, it is helpful
to frame the context in which the negotiations regarding the 2003 transaction and the
License Agreement took place. The record shows that, from Roche‘s perspective, a
fundamental purpose of the 2003 transaction was to obtain sufficient ECL-related rights
such that it could operate inside of the defined Field without interference from IGEN or
Meso. At the time the 2003 transaction was being negotiated, Meso‘s ECL-related rights
pertained largely to the use of ECL outside of the Field (i.e., in regard to Multi-Array
Assays)136 and Meso, a significantly smaller and less established company than Roche,
136
The term Multi-Array Assay is defined in Section 1.9 of the License Agreement.
45
wished to avoid having to compete with Roche in areas related to Multi-Array Assays,
where Meso historically had been engaged in ECL-related research and development.137
Against the background of this difference in focus (Roche on in-Field ECL use
and Meso on Roche‘s potential out-of-Field ECL use), during the negotiations leading up
to the 2003 transaction, it was uncertain what, if any, in-Field ECL-related rights Meso
had. This uncertainty stemmed from two things: (1) the amorphous scope of Meso‘s
Research Program and Research Technologies under the 1995 License Agreement, as
amended; and (2) the unknown scope of Meso‘s ―springing rights‖ under that agreement.
At the time of the negotiations, the relatively inexact nature of Meso‘s ―springing rights‖
threatened to, at a minimum, create uncertainty as to Roche‘s ability to operate
uninhibitedly within the Field in the future. If Meso‘s ―springing rights‖ came to fruition
after Roche‘s execution of the License Agreement with IGEN, it was conceivable that the
License Agreement itself would not give Roche the in-Field protection it wanted for the
entirety of the agreement‘s duration.
Therefore, at the time the 2003 transaction was being negotiated, Roche seems to
have tried to ensure that Meso‘s ill-defined ECL-related rights, both then and in the
future, would not preclude Roche from enjoying the unfettered use of ECL Technology in
the Field that it desired. Roche‘s need to resolve or mitigate these uncertainties, and the
137
One area of particular importance to Meso appears to have been clinical trials
related to the development and approval of pharmaceutical drugs. Such clinical
trials are excluded expressly from the definition of ―Field.‖ JTX 263 § 1.7(b) at
ROCHE0055865.
46
manner in which it attempted to do so, lies at the heart of this dispute. From Meso‘s
perspective, communications with IGEN and the JVOC focused primarily on minimizing
out-of-Field activities by Roche. With that framework in mind, I turn to an examination
of the License Agreement‘s drafting history.
1. The early negotiating documents
In arguing that the drafting history of the License Agreement supports its
construction of the attached consent, Meso relies most prominently on two documents
prepared by IGEN: a November 23, 2002 ―Summary of Key Differences between IGEN
and Roche Drafts of License Agreements between [IGEN] and [Roche]‖138 and a January
17, 2003 mark-up of a draft license agreement.139 In the ―Summary of Key Differences,‖
IGEN observed that Roche, in its most recent proposed draft of the License Agreement,
wanted a ―grant of rights from both IGEN and its Affiliates,‖140 and that Roche wanted
―MSD and MST to join in the License Agreement (both licenses and covenants not to
sue).‖141 The January 17 mark-up contained a comment from IGEN in Section 2.1, the
grant clause, stating that ―Roche is concerned (1) that there are springing exclusive rights
in Meso that would preclude granting of these non-exclusive rights to Roche . . . .‖142
138
JTX 104 at CSM0033045.
139
JTX 118.
140
JTX 104 at CSM0033048. In this draft of the License Agreement, the definition
of ―Affiliates‖ included MSD and MST. Id. at CSM0033021.
141
Id. at CSM0033052.
142
JTX 118 at ROCHE0038195.
47
According to Meso, these documents show that Roche wanted Meso to ―join in‖ the
licenses granted so that it could obtain a license from Meso. The documents, however,
do not constitute meaningful evidence in support of that proposition.143
As to the ―Summary of Key Differences,‖ the evidence suggests that Roche had
never seen that document before this litigation,144 and the language that Meso emphasizes
from the chart merely parrots the language used in the body of a November 2002 mark-
up itself. In other words, the document reflects no analysis or interpretation of the
relevant language, just a mechanical copying and pasting of it. Therefore, the ―Summary
of Key Differences‖ provides little, if any, insight about IGEN‘s ―understanding‖ of what
Roche was pursuing from Meso. Regarding the January 17 mark-up, the fact that IGEN
recognized that Roche had concerns about Meso‘s ―potential springing rights,‖ in and of
itself, does not assist the Court in determining the most reasonable interpretation of ―join
in.‖145 In this draft, Roche did ask for a grant of rights from IGEN and its ―Affiliates.‖
143
I note initially that the most recent of these documents was prepared in January
2003, approximately six months before the License Agreement was finalized. In
the six months between the January 2003 draft and the announcement of the 2003
transaction, Roche and IGEN, on behalf of itself and Meso, engaged in extensive
negotiations surrounding the License Agreement that resulted in material changes
to the content of that agreement. This fact also undercuts the probative value of
Meso‘s evidence for purposes of deciding its breach of contract claim.
144
Tr. 615–16 (Steinmetz).
145
As of January 17, 2003, Section 9.6 of the License Agreement, which contains
important representations and warranties by IGEN about its ability to grant the
licenses contemplated in the License Agreement, was not in final form. Compare
JTX 118 § 9.6 at ROCHE0038205 and JTX 263 § 9.6 at ROCHE0055877. The
final version of Section 9.6 arguably reduced or eliminated the uncertainty Roche
48
Yet, the ―join in‖ language appeared in the same consent in which there was proposed
language to the effect that Meso had no rights in the ECL Technology being licensed to
Roche and a footnote indicating that Roche was ―considering whether a formal license of
ECL Technology from MSD/MST to [Roche] may be necessary to assure [Roche]‘s
access to all ECL Technology.‖146 Read as a whole, the January 17 mark-up raises
several questions about the meaning of ―join in,‖ such as: (1) if Meso explicitly was
granting rights to Roche in the body of the draft, what added benefit would be provided
by Meso ―joining in‖ the licenses granted?; (2) why would Roche ask for a grant of rights
from Meso when it was asking simultaneously that Meso represent that it had no relevant
rights in ECL Technology?; and (3) why would Roche consider seeking a formal license
from Meso if it believed that Meso was a party to the license agreement and had given it
a license by virtue of ―joining in‖ the licenses granted? In sum, the January 17 mark-up
is neither conclusive nor persuasive evidence that Roche intended to make Meso a party
to the License Agreement through the ―join in‖ language in the consent.
The November 2002 and January 2003 documents Meso relies upon, therefore,
provide minimal, if any, support for an inference that IGEN‘s understanding of Roche‘s
position as to the License Agreement at that time was that Roche wanted a license from
Meso and wanted Meso to be a party to the License Agreement. Moreover, the weight of
had concerning IGEN‘s ability to grant the necessary licenses and concomitantly
the need for Roche to obtain a grant of rights from Meso.
146
JTX 118 at ROCHE0038211.
49
that evidence is undermined significantly by the fact that not a single IGEN
representative testified that they believed that Meso was a party to the License
Agreement or that Roche was seeking a license from Meso. To the contrary, IGEN‘s
CFO and General Counsel each credibly denied that Meso was a party to the License
Agreement or a licensor thereunder.147 Thus, regardless of what objectives IGEN may
147
Migausky Dep. 43; Abdun-Nabi Dep. 283. Abdun-Nabi was not involved in
negotiating the consent and had no specific understanding of what ―join in‖ was
supposed to mean. Abdun-Nabi Dep. 238, 249. Nevertheless, as IGEN‘s General
Counsel, Abdun-Nabi was familiar with the overall purpose and scope of the 2003
transaction generally, and the License Agreement specifically. Therefore, I find
Abdun-Nabi‘s general understanding of Meso‘s relation to the License Agreement,
as stated in the following exchange, to be credible and helpful in deciding the
issue before me: ―Q: So fair to say that you don‘t have a position on how the
phrase consent to and join in the licenses granted in the license agreement should
be interpreted in this litigation? A: Well, what I would say is that it should not be
interpreted as though they were a full party to the license agreement, because to
me, that was never my understanding, nor do I think it was our board‘s
understanding, nor do I think it‘s consistent with anything that we publicly
disclosed. They were not parties to the license agreement. They were being asked
to provide certain assurances and consents and waivers to give Roche comfort
that what they were getting was what they sought. And we never disclosed it as
they were parties to this agreement or they had underlying rights to the agreement.
We never -- I never understood that. I never communicated that to the board, to
my recollection. But there were some ancillary assurances that Roche was
seeking, sought, negotiated for and secured, and MSD and MST and Jacob were in
active discussions around that, and ultimately agreed to whatever language that is
here . . .‖ Id. at 282–83 (emphasis added). In addition, the fact that Abdun-Nabi
was not involved in any detailed negotiations over the consent supports the
conclusion that the consent did not make Meso a party to the License Agreement.
If Meso was made a party to the License Agreement, that would affect both
Roche‘s and IGEN‘s rights under the agreement. There is no evidence to support
the inference that, in this highly negotiated transaction, IGEN was willing to allow
Roche to add additional parties to the License Agreement without its explicit
knowledge or consent (or at a minimum, the knowledge or consent of its General
Counsel).
50
have thought Roche was pursuing at some earlier stage in the negotiations,148 the weight
of the evidence supports the conclusion that when the License Agreement was finalized
in July 2003, IGEN, like Roche, did not believe Meso was a party to that agreement or
otherwise had the right to enforce its provisions.
2. The documents regarding the nature of the ECL Technology
Exhibit A to the License Agreement, entitled ―ECL Patent Rights‖ is a 27-page list
of IGEN‘s patents related to ECL technology. In Section 9.7 of the agreement, to which
Meso consented, IGEN represented and warranted to Roche that ―Exhibit A includes all
patents and patent applications which: (a) exist at or prior to the Effective Time; (b) are
owned and/or controlled by IGEN and/or any Affiliate thereof; and (c) cover ECL
Technology.‖149
As discussed supra, Roche wanted a license to any ECL Technology that IGEN
possessed in the Field to commercially exploit Products.150 The License Agreement
defined ―Product(s)‖ to mean ―ECL Instruments, service of ECL Instruments and spare
148
As of January 2003, Meso had not yet signed a confidentiality agreement with
Roche and was not participating, at least directly, in the negotiations over the
License Agreement.
149
JTX 263 § 9.7 at ROCHE0055878 (emphasis added).
150
Id. § 2.1 at ROCHE0055867. This finding is supported further by the fact that the
License Agreement provides that if it is discovered that any patents or patent
applications have been omitted from Exhibit A, Roche automatically is entitled to
a license to those patents and patent applications as of the date the License
Agreement was executed. Id. § 9.7 at ROCHE0055878.
51
parts; and ECL Assays.‖151 The agreement also defined ―ECL Assays‖ as not including
―a Multi-Array Assay‖ and an ―ECL Instrument‖ as an instrument that, among other
things, ―cannot perform any Multi-Array Assay.‖152 Generally speaking, in 2003, Meso‘s
business involved predominantly Multi-Array Assays which were outside of the Field.
The requirement in the License Agreement that IGEN list each of the patents and
patent applications that it or an Affiliate owned or controlled covering ECL Technology
supports a reasonable inference that it was a condition precedent for Roche to understand
the scope of rights it was receiving before accepting a license from a potential licensor of
ECL Technology (or any other) rights. Conspicuously absent from the License
Agreement, the consent, any of the other key documents from the 2003 transaction, or
any draft of any of those documents, is a similar list or other description of Meso‘s rights
in ECL Technology. Without a list or description of Meso‘s ECL-related rights
associated with any of the 2003 transaction documents, the question becomes, if Meso, as
it argues, became a party to the License Agreement and granted Roche a license, what
rights did it grant to Roche? Meso argues that it did not provide Roche with a document
comparable to Exhibit A to the License Agreement because Roche simply wanted a grant
of whatever in-Field ECL rights Meso had. This argument, however, is unavailing for at
least three reasons.
151
Id. § 1.13 at ROCHE0055867.
152
Id. §§ 1.3(c)(vii) at ROCHE0055863; 1.4(a)(vii) at ROCHE0055864.
52
First, the 2003 transaction consisted of several complex, interrelated transactions,
whose values in the aggregate exceeded $1 billion, and all of which were negotiated
heavily by sophisticated parties with the assistance of counsel. The License Agreement
was one of the most, if not the most, important elements of the 2003 transaction. In that
context, the notion that Roche wished to make Meso a party to the License Agreement
less than explicitly to obtain an unspecified and unverified grant of rights is not credible.
Second, neither the consent nor any drafts of the consent contain any indication that
Meso was granting Roche a license to all of its rights in ECL Technology in the Field or
otherwise. Finally, Roche actually wanted rights (albeit limited by the Field) to all of
IGEN‘s technology, yet it still insisted on a detailed list of what those rights were and
representations and warranties as to the completeness of that list.153 With one possible
exception, Meso has advanced no cogent argument that explains satisfactorily why Roche
would treat IGEN and Meso so differently in terms of requiring them to verify the rights
that they were granting to Roche under the License Agreement.154 Overall, however,
153
Roche proposed Section 9.7 of the License Agreement, entitled ―Completeness of
Exhibit A‖ on May 20, 2003. JTX 182 at MESO00009438. By that time, Meso
had signed a confidentiality agreement with Roche and was included in
distributions of mark-ups of the draft License Agreement. Therefore, Meso was
aware of the importance Roche placed on having a detailed understanding of the
rights to which it was obtaining a license.
154
That exception is that Roche recognized that whatever rights Meso might have
relevant to the Field would stem from the 1995 Agreement. In particular, it was
possible that Meso might acquire certain ―springing rights‖ pertaining to the Field
in the future, if certain contingencies were satisfied. There is no reliable evidence
in the record that any such rights had materialized definitively as of July 2003
when IGEN and Roche entered into the License Agreement. In these
53
Meso‘s failure to produce a document comparable to IGEN‘s Exhibit A is another factor
weighing against a finding that Meso was intended to be made a party to the License
Agreement by the ―join in‖ language.
3. Key sections of the License Agreement
At least three additional aspects of the drafting history that support Roche‘s
interpretation of the ―join in‖ language in the consent deserve discussion. First, by May
8, 2003, the definition of an IGEN ―Affiliate‖ in the draft License Agreement had
changed from specifically including MSD and MST to explicitly excluding them.155
Notwithstanding this change, the grantors of the license under the agreement continued to
be ―IGEN and its Affiliates‖156 from that point until the License Agreement became
final.157 Thus, while Meso argues that Roche wanted to protect itself by making Meso a
party to the License Agreement and obtaining a license from Meso, this drafting history
and the absence of any modification to any other portion of the agreement to reflect
Meso‘s putative party status seriously undermine Meso‘s argument.158 Indeed, there is no
circumstances, IGEN and Roche may have concluded that the consent attached to
the License Agreement that Meso signed adequately protected Roche‘s
expectations.
155
JTX 163 § 1.1 at MESO00000777–78.
156
Id. § 2.1 at MESO00000784.
157
JTX 263 § 2.1 at ROCHE0055867.
158
The same ―join in‖ language appeared in drafts of the consent both before and
after IGEN, Roche, and Meso agreed to remove Meso from the definition of
Affiliate.
54
evidence that Roche, IGEN, or Meso made any change to the License Agreement itself or
to the consent after Meso was removed from the definition of an IGEN Affiliate that
would support a reasonable inference that Meso was a party to the agreement or was
granting Roche a license.159 Therefore, Roche‘s agreement to exclude MSD and MST
from the definition of an IGEN Affiliate is inconsistent with Meso‘s position that Roche
wanted Meso to become a party to the License Agreement through the ―join in‖ language
in the consent.
Second, Sections 2.5 and 2.6 of the License Agreement, the sections that Meso
wishes to enforce in this litigation, remained largely unchanged from the time that Meso
signed a confidentiality agreement with Roche until the execution of the final version of
the License Agreement. Therefore, Meso took no active role in negotiating those key
provisions. This seems inconsistent with Meso‘s purported role as a party to, and
licensor under, the License Agreement.160 Moreover, there was credible testimony that
there were never any discussions of Meso having enforcement rights under Article 2, or
159
The record shows that the parties excluded MSD and MST from the definition of
an IGEN Affiliate because they did not meet the requisite criteria set out in
Section 1.1 of the License Agreement. Tr. 608–10 (Steinmetz); Tr. 70–71
(Wohlstadter). The exclusion of Meso from that term, however, also had the
effect of removing Meso as an entity that, under the plain language of the License
Agreement, was granting Roche rights, and relegating it to the status of an entity
that only had agreed to ―consent to and join in‖ a license being granted by others,
namely IGEN and its Affiliates.
160
To the extent Wohlstadter participated in negotiating any part of Article 2 before
Meso signed a confidentiality agreement, I already have found that such
involvement was in his capacity as a consultant to IGEN, not as a representative of
Meso. See note 38 supra and accompanying text.
55
any other Article or Section, of the License Agreement.161 Meso‘s lack of involvement in
negotiating the provisions of the License Agreement it seeks to enforce, as well as the
lack of any discussion of Meso‘s ability to enforce those provisions, buttress my
conclusion that Meso was not intended to be a party to any part of the License Agreement
or to become a licensor to Roche. 162
Finally, on May 20, 2003, Roche proposed several additions to Section 9.6 of the
License Agreement, a section addressing certain representations and warranties made by
IGEN. In its proposed language, Roche sought additional representations and warranties
from IGEN that: (1) ―the grant of rights and licenses, and the performance of its
obligations hereunder will not conflict with [IGEN‘s] charter documents or any
agreement, contract or other arrangement to which it is a party or by which it is bound‖;
and (2) ―no consent, notice, approval, authorization, waiver or permit, to or from any
person, including, but not limited to, any Governmental Entity or third party holder of
intellectual property rights is required to be obtained or made by IGEN in connection
with its execution and delivery of this Agreement . . . .‖163 These representations and
warranties, with minor modifications, were incorporated into the final version of the
161
Tr. 645 (Steinmetz); Tr. 876 (Ruetsch); Abdun-Nabi Dep. 121-23.
162
This is particularly true as to Section 2.5, which, by its plain language, only gives
IGEN the right to invoke the Field Monitor process or receive monetary
compensation for Roche‘s inadvertent out-of-Field sales. JTX 263 § 2.5 at
ROCHE0055869. Indeed, Wohlstadter explicitly recognized this fact in his July
16, 2003 memorandum to the JVOC. See JTX 210 ¶ 6.
163
JTX 182 § 9.6 at MESO00009438.
56
License Agreement,164 subject to an indication in § 9.6(iv) that the representations
regarding consents or approvals, excluded any ―consents attached hereto.‖ As discussed
below, Meso requested that change presumably to cover its consent. In any event, the
representations in Section 9.6 underscore the importance to Roche of assuring that IGEN
could grant Roche the rights in the Field that it sought.
Meso has offered no persuasive explanation why, if it was understood that Meso
was a party to the License Agreement and was granting Roche a license, Roche sought
additional representations and warranties from its obvious licensor, IGEN, but not from
Meso. Meso‘s failure to provide such an explanation is of particular note because Meso
unquestionably knew about the additional representations and warranties that Roche was
seeking from IGEN and even went so far as to comment on them.165 Because Meso was
aware that Roche had concerns which it sought to ameliorate by obtaining additional
representations and warranties from IGEN, it is unreasonable for Meso to have viewed
164
JTX 263 § 9.6 at ROCHE0055877–78.
165
JTX 182 § 9.6 at MESO00009438. The most significant comment made by Meso
was its suggestion that the phrase ―excluding any consents attached hereto‖ be
added after the reference to ―no consent, notice, approval, authorization, waiver or
permit, to or from any person‖ in Section 9.6. Id. Meso‘s comment confirms that
it was not a party to the License Agreement. First, Meso itself recognized the
document it was signing was a ―consent,‖ not a joinder or a license grant. Also,
Meso‘s comment reveals its position that so long as IGEN had Meso‘s consent,
IGEN‘s representations and warranties in Section 9.6 were true. By giving IGEN
and Roche its consent, Meso effectively agreed with IGEN‘s representations in
Section 9.6.
57
itself as a party to, or licensor under, the License Agreement without having made similar
representations and warranties to Roche.166
Therefore, considered as a whole, the parol evidence relating to the drafting
history of the License Agreement and the attached consent support the conclusion that the
parties did not intend the ―join in‖ language in the consent to make Meso a party to, or
licensor under, the License Agreement.
E. The Events of July 2003 Also Support the Conclusion that Meso is Not a
Party to the License Agreement
On July 9, 2003, the same day the Fourth Circuit Court of Appeals affirmed its
right to terminate Roche‘s license, IGEN purported to terminate the 1992 License
Agreement. According to Meso‘s interpretation of the 1995 License Agreement it had
with IGEN, this termination activated its ―springing rights,‖ giving Meso an exclusive
interest in all of the ECL technology that previously had been licensed to Roche. Yet,
between July 9 and July 23, 2003, when the License Agreement was executed, no
166
To the extent Meso argues that it did make those representations and warranties by
―joining in‖ the licenses granted in the agreement, I find that argument
unpersuasive. First, Section 9.6 clearly states that IGEN, not Meso, is making the
representations and warranties. Second, in the Ongoing Litigation Agreement,
discussed in more detail infra, Meso signed a joinder in which it agreed it would
be treated ―as though it were IGEN‖ for certain purposes. JTX 257 at
MESO00042496. Meso made no such agreement as to the License Agreement.
Finally, Section 9.6(iii) is substantively identical to the representation and
warranty Meso made in the consent that it had not ―licensed, assigned, or
otherwise disposed of any rights that . . . would restrict or limit [Roche]‘s exercise
of the licenses granted in the License Agreement.‖ JTX 263 at ROCHE0055887.
Meso‘s representation in the consent would be entirely superfluous if it also had
been deemed to have made all of the representations and warranties in Section 9.6.
58
significant modifications were made to that document. Equally significant, there is no
evidence that any of Meso, IGEN, or Roche ever discussed the implications of the Fourth
Circuit‘s decision on the License Agreement. Assuming Meso is correct that IGEN‘s
purported termination of the 1992 License Agreement triggered its ―springing rights‖ and
gave it exclusive rights to all of the ECL technology that previously had been licensed to
Roche in the 1992 License Agreement, the notion that the then-proposed agreement
would not need to be amended or that Meso, as a purported party to, and licensor under,
that agreement would not seek to engage in any sort of direct negotiations with Roche is
puzzling, at best.
A week after the Fourth Circuit affirmed IGEN‘s right to terminate the 1992
License Agreement, and days before the new License Agreement was executed,
Wohlstadter sent a memo to the JVOC demanding compensation for his cooperation in
connection with the 2003 transaction. In that memo, Wohlstadter referred no fewer than
seven times to the fact that IGEN was granting Roche a license, but the document never
stated that Meso was granting Roche a license.167 Moreover, Wohlstadter made no
mention of Meso‘s ―springing rights,‖ or the significant increase in the scope of its rights
that Meso apparently claims would have resulted from IGEN‘s termination of the 1992
License Agreement. If Wohlstadter believed that Meso was a party to the License
Agreement and was granting Roche a license, he undoubtedly would have made that
167
As discussed in Section I.B.6 supra, Wohlstadter himself also drew a distinction
between ―joining in‖ the licenses being granted to Roche and ―becoming a party‖
to several other agreements.
59
point directly in his memo, which was designed to present as compelling a case as
possible for compensation.
The fact that the memo was written to the JVOC, rather than Roche, also calls into
question Meso‘s assertion that it granted Roche a license in connection with the 2003
transaction. Although Roche paid IGEN over $1 billion in connection with the 2003
transaction, it paid Meso nothing.168 Despite allegedly having an exclusive interest in
most, if not all, of the rights to the ECL technology that Roche was pursuing in the 2003
transaction and, thus, also having significant leverage over Roche, there is no evidence
that Meso ever requested monetary compensation from Roche or that Roche ever offered
Meso monetary compensation in exchange for its consents.169 While Meso‘s actions
168
Meso argues that it received valuable nonmonetary compensation in the form of
the Field restrictions for the license it allegedly granted Roche. The record,
however, does not support that contention. The Field restrictions in the License
Agreement were negotiated by IGEN, not Meso. Thus, I do not find credible
Meso‘s assertion that it was willing to accept Field restrictions negotiated by
IGEN primarily for IGEN‘s benefit as its sole form of compensation from Roche
for granting it a license to all of Meso‘s ECL rights within the Field.
169
I note further that, although Meso argues it granted Roche a license under the
License Agreement, there is a notable absence of evidence of direct
communications between Meso and Roche. IGEN and Roche communicated
directly with one another on a relatively frequent basis even outside of the direct
negotiations of the transaction documents. See, e.g., JTX 186, JTX 187, JTX 200.
In one such exchange in June 2003, Humer expressed ―concern‖ to Samuel
Wohlstadter that because ―some of the leading participants on your side are not
only acting as representatives of IGEN, but also have an involvement in Meso,
they may well be less enthusiastic to defend the interest of IGEN and its‘ [sic]
shareholders, than keeping an eye on possible future developments with respect to
Meso.‖ JTX 186 at PA0000091. Humer asked that the elder Wohlstadter ―help us
all to minimize any misunderstandings as we approach the final rounds of
negotiations.‖ Id. Samuel Wohlstadter responded that ―MSD representatives have
60
were inconsistent with those of a party to the License Agreement that had granted a
license to Roche, they were entirely consistent with those of an entity whose primary
source of leverage in the 2003 transaction was its ability to block a tax-favored
transaction structure that would benefit IGEN‘s shareholders. Therefore, the key events
that occurred shortly before the consummation of the 2003 transaction support the
conclusion that IGEN, Roche, and Meso did not intend to make Meso a party to the
License Agreement or to give it the enforcement rights of a licensor under the terms of
that agreement through the ―join in‖ language in the consent.
F. The Other Agreements Executed By Meso In Connection With the 2003
Transaction Support the Conclusion that Meso is Not a Party to the License
Agreement
As stated supra, in addition to the consent to the License Agreement, Meso also
signed four other documents as part of the 2003 transaction: (1) the Global Consent and
Agreement; (2) the Joinder to the Ongoing Litigation Agreement; (3) the Covenants Not
to Sue; and (4) a July 24, 2003 letter agreement. The contents of each of these
participated at Roche‘s request in certain aspects of this transaction to ensure that
Roche obtains the consents that it desires. At no time during these negotiations
has any MSD representative controlled or influenced these negotiations in any
manner adverse to IGEN or its shareholders.‖ JTX 187 at CSM0031184
(emphasis added). This exchange is telling both for its substance (i.e., IGEN‘s
recognition that Meso is giving Roche consents, not a license) and for the absence
of any evidence of a similar discussion occurring between Meso and Roche.
61
documents support the conclusion that Meso was not intended to be a party to the License
Agreement.170
Meso signed the Global Consent and Agreement (the ―Global Consent‖) as a
party,171 and designated an address at which it could receive communications related to
that document.172 Meso did neither of these things in relation to the License Agreement.
Of greater significance, however, is that in communications regarding the drafting of the
Global Consent, counsel for Meso, James McMillan, differentiated between the License
Agreement and Meso‘s consent thereto. For example, in a July 19, 2003 draft of the
Global Consent, McMillan proposed making ―Consent to License Agreement‖ a defined
term meaning ―the Consent by [MSD] and [MST] attached to the License Agreement.‖173
The final version of the Global Consent, for all intents and purposes, reflected
McMillan‘s designation.174 Equally important, McMillan defined the term ―MSD
Transaction Documents‖ with respect to MSD and MST as including the ―Consent to
170
These documents are relevant because ―[u]nder New York law, all writings
forming part of a single transaction are to be read together.‖ This Is Me, Inc. v.
Taylor, 157 F.3d 139, 143 (2d Cir. 1998). See also Nau v. Vulcan Rail & Constr.
Co., 286 N.Y. 188, 197 (N.Y. 1941) (finding documents ―executed at substantially
the same time,‖ and ―related to the same subject-matter‖ ―were contemporaneous
writings‖ that ―must be read together as one.‖).
171
JTX 258 at MESO00042528.
172
Id. § 5.02 at MESO00042521.
173
JTX 224 at WH0062212 and WH0062217.
174
See JTX 258 at MESO00042510 (stating ―Consent to License Agreement‖ means
―the Consent by MSD and MST to the License Agreement and attached thereto.‖).
62
License Agreement,‖ but did not mention the License Agreement.175 Nor does anything
else in the Global Consent indicate that Meso became a party to the License Agreement
or was, in any way, a licensor to Roche.176
As with the License Agreement, there are only two defined ―Parties‖ in the
Ongoing Litigation Agreement: IGEN and Roche.177 In contrast to the License
Agreement, however, the Ongoing Litigation Agreement states expressly that it ―shall not
become effective unless and until . . . [it is] joined by [MSD] and [MST] as evidenced by
each of those companies signing the Joinder set forth on the signature page her[e]of.‖178
Meso signed a page of the Ongoing Litigation Agreement that contains the following,
bolded language: ―JOINDER: Each of [MST] and [MSD] joins this Ongoing Litigation
Agreement solely to confirm that it agrees to be bound by Section 3.3 and Article 8 of
this Agreement as though it were IGEN for this purpose.‖179
175
Id.; JTX 230 at CSM0037147, 0037153 (McMillan comments).
176
The same can be said of the July 24, 2003 letter agreement. Like the Global
Consent, Meso signed the letter agreement as a party. JTX 260 at
ROCHE0056141. Also like the Global Consent, the letter agreement is devoid of
any suggestion that Meso is a party to the License Agreement or is a licensor to
Roche.
177
JTX 257 at MESO00042482.
178
Id. § 8.12 at MESO00042491.
179
Id. at MESO00042496. Among other things, Article 8 contains the Ongoing
Litigation Agreement‘s notice provision. In it, IGEN lists an address to which
relevant communications should be sent. Id. § 8.3 at MESO00042489.
63
The document Meso signed in connection with the License Agreement was
labeled ―Consent by [MSD] and [MST].‖180 The Ongoing Litigation Agreement,
however, shows that when those involved in the 2003 transaction wished to have a ―non-
Party‖ join and be bound by an agreement, they made that explicit. The ―consent‖ signed
by Meso in relation to the License Agreement did not specify explicitly that Meso would
be bound by that agreement. In that sense, the consent differs materially from the
―joinder‖ it signed in relation to the Ongoing Litigation Agreement. The consent‘s more
general and less explicit reference to ―joining in‖ fails to evidence any clear intent to
have Meso become a party, in any way, to the License Agreement.181
As to the Covenants Not to Sue, that document specifically identifies Meso as a
―Party.‖182 This further demonstrates that when those participating in the 2003
transaction wished to make someone a party to an agreement, they made that designation
180
JTX 263 at ROCHE0055887.
181
I note that Meso cites the same Ongoing Litigation Agreement as evidence in
support of its contrary argument that in ―joining in‖ the licenses granted, it became
a party to all of Article 2, and not just Sections 2.1 and 2.7. According to Meso,
the Ongoing Litigation Agreement demonstrates that if the parties intended to
confine Meso‘s status as a party narrowly to Sections 2.1 and 2.7 of the License
Agreement, they would have made that explicit, as it was in the Ongoing
Litigation Agreement. Although Meso‘s argument has some appeal, I consider it
more telling that the participants in the 2003 transaction, including Meso, plainly
knew how to use specific joinders to add ―non-Parties‖ to agreements when they
so intended. Yet, the ―consent‖ attached to the License Agreement signed by
Meso bears little resemblance to the ―joinder‖ used in a contemporaneously
executed related agreement.
182
JTX 265 at MESO00042700.
64
clear. Also unlike in the License Agreement, in the Covenants Not to Sue, Meso
designated an address where it could receive relevant notices or communications.183 Of
greatest relevance to this litigation, however, are two ―Whereas‖ clauses in the beginning
of the agreement. The second of the Whereas clauses in the Covenants Not to Sue states,
―WHEREAS, [IGEN and Roche] are parties to a License Agreement dated as of the date
hereof [i.e., July 24, 2003],‖ while the fourth such clause notes, ―WHEREAS, Meso
Scale, [i.e., MSD and MST] are parties to one or more license agreements between
themselves and with [IGEN] relating to ECL Core Technology.‖184 It is reasonable to
infer that each of these ―Whereas‖ clauses would have been worded differently if, Meso,
in fact, had been intended to be a licensor to Roche under the License Agreement.
In sum, the content of the other documents Meso executed contemporaneously
with the consent to the License Agreement support the conclusion that Meso was not a
party to the License Agreement. Those involved in the 2003 transaction clearly
understood how to designate an entity as a party to any given agreement, just as they
understood how to effectuate a non-party‘s joinder to an agreement. The 2003
transaction documents demonstrate a consistent understanding that Meso executed a
―joinder‖ to the Ongoing Litigation Agreement and a ―consent‖ to the License
Agreement. If those participating in the 2003 transaction wished the ―joinder‖ and the
―consent‖ to have the same legal effect, I find that they would have used the same term in
183
Id. § 7.7 at MESO00042710.
184
Id. at MESO00042700 (emphasis added).
65
both instances instead of maintaining a consistent distinction between them. Meso did
not adduce any meaningful evidence to the contrary. Therefore, I conclude that the
documents other than the consent attached to the License Agreement executed by Meso
in conjunction with the 2003 transaction provide additional evidence weighing in favor of
finding that Roche and IGEN did not intend that the ―join in‖ language in the consent
would make Meso a party to the License Agreement as a whole or to the enforcement
provisions of Article 2.
G. Meso’s Conduct After 2003 Supports the Conclusion that it is Not a Party to
the License Agreement
Under New York law, the parties‘ course of performance under an agreement is
given meaningful weight by a court attempting to determine the intent of the parties at the
time the agreement was reached.185 The evidence presented at trial supports the
conclusion that, after the execution of the License Agreement in July 2003, Meso did not
conduct itself as though it were a party to that agreement or a licensor to Roche.
Notwithstanding Wohlstadter‘s testimony that the Field restrictions in the License
Agreement were of critical importance to Meso, Meso did not make any discernable
185
See Gulf Ins. Co. v. Transatlantic Reins. Co., 886 N.Y.S.2d 133, 143 (App. Div.
2009) (―How the parties perform a contract necessarily is manifested after
execution of the contract, but their performance is highly probative of their state of
mind at the time the contract was signed.‖); Fed. Ins. Co. v. Americas Ins. Co.,
691 N.Y.S.2d 508, 512 (App. Div. 1999) (―[T]he parties‘ course of performance
under the contract is considered to be the most persuasive evidence of the agreed
intention of the parties. Generally speaking, the practical interpretation of a
contract by the parties to it for any considerable period of time before it comes to
be the subject of controversy is deemed of great, if not controlling, influence.‖)
(internal quotation marks and citations omitted).
66
effort to monitor Roche‘s compliance with those limitations after the License Agreement
was finalized. Meso first learned of a potential issue involving Roche selling outside of
the Field in June 2006, nearly three years after the License Agreement was executed,
through BioVeris‘s public filings.186 When Meso learned of this potential issue, it did not
demand that Roche cease and desist its out-of-Field sales, nor did it conduct its own
investigation. Instead, Meso ―waited to see what was going to come out of‖ the BioVeris
investigation because ―the way that process worked under the [License Agreement],
BioVeris was responsible for initiating the field monitor process and following through
with this.‖187
If Meso believed it was a party to the License Agreement with the enforcement
rights that it is asserting in this litigation, however, it is unclear why it would remain a
passive bystander. Even if Meso thought it would be in its best interests to allow
BioVeris to conduct the Field Monitor process on its own, at a minimum, it still could
have been active in the process. For example, based on the purported critical importance
of the Field restrictions to Meso, it could have requested regular updates on the status of
the process from BioVeris. The evidence shows, however, that Meso did nothing to
186
Tr. 141 (Wohlstadter).
187
Id. at 141–42.
67
monitor either Roche‘s compliance with the License Agreement‘s Field restrictions or
BioVeris‘s oversight of Roche‘s compliance.188
Meso also took no meaningful action to assert the rights it is claiming in this
litigation in connection with the 2007 transaction between Roche and BioVeris.
Wohlstadter testified that Meso did not attempt to enjoin or otherwise challenge that
transaction because Keller of Roche told him that Roche would not negotiate with Meso
until after its acquisition of BioVeris closed.189 Meso‘s failure to act, however,
undermines its current claim to have had contractual rights under the License Agreement
to prevent Roche from intentionally operating outside the Field. If Meso believed that it
had the rights it is asserting under the License Agreement, or any other agreement, and
that such rights would be affected adversely by Roche‘s acquisition of BioVeris, one
would have expected it to do more to enforce those rights than Meso did -- i.e., waiting
for the deal to close and enduring significant harm before taking any concrete action to
attempt to resolve its dispute with Roche. Moreover, while Meso and Roche did
negotiate with one another after the Roche-BioVeris transaction closed in June 2007,
there is no evidence that Meso asserted any rights under the 2003 License Agreement
during these negotiations. Wohlstadter admitted that he never explicitly mentioned the
188
In contrast, Meso‘s actions were consistent with the 2004 MSD appraisal process,
in which neither MSD nor MST identified the License Agreement as a source of
any of their rights. More broadly, Meso has failed to cite any record evidence in
which it identified itself as a party to the 2003 License Agreement or as a licensor
to Roche before the commencement of this litigation.
189
Tr. 152–53 (Wohlstadter).
68
2003 License Agreement as the source of the rights he was asserting in his negotiations
with Roche.190 This was confirmed by Christian Steinmetz, Roche‘s outside counsel, who
testified that in negotiations between Roche and Meso, Wohlstadter tied the source of his
rights ―back to the IGEN/MSD 1995 license agreement.‖191 Therefore, Meso‘s conduct
after the License Agreement became effective also supports a finding that Meso was not a
party to the License Agreement and has no rights to enforce its terms.
190
Tr. 298–99 (Wohlstadter)
191
Tr. 659-60 (Steinmetz). See also Tr. 924 (Ruetsch) (―Q: During your discussions
after the 2007 transaction, did Jacob Wohlstadter ever suggest to you that the
rights he was claiming were flowing from the 2003 agreement? A: No.‖). The
documentary evidence, including the fourth draft settlement ―agreement‖
circulated among Meso and Roche in April 2008, supports Steinmetz‘s and
Ruetsch‘s testimony. JTX 555. See also JTX 527 (Aug. 2007 draft); JTX 539
(Sept. 2007 draft); JTX 543 (Oct. 2007 draft). According to the ―Whereas‖
clauses of the April 2008 draft, Meso and Roche ―desire[d] to enter into this
Agreement to clarify their respective rights to the ECL technology and to continue
the separation of the BioVeris‘ and MSD‘s businesses.‖ JTX 555 at
ROCHE0000325. One reason this clarification was necessary was because ―MSD
holds an exclusive license to [ECL] technology owned by BioVeris pursuant to
that certain License Agreement, dated as of November 30, 1995 (as amended, the
‗IGEN/MSD License Agreement‘), by and between MSD and BioVeris (as
successor to [IGEN]).‖ Id. The only mention of the 2003 License Agreement in
the April 2008 draft is that Meso ―affirmed‖ the consents it had given previously
in relation to a license limited to the Field. Id. § 6.3 at ROCHE0000329. Thus, it
appears that, in its negotiations with Roche regarding conduct outside the Field,
Meso was asserting its rights under the 1995 License Agreement with IGEN, and
not rights under the 2003 License Agreement between IGEN and Roche.
69
H. Roche Has Presented the More Reasonable Interpretation of the “Join In”
Language in the Consent192
Because the ―join in‖ language in the consent cannot reasonably be interpreted as
making Meso a party to the License Agreement, the final remaining inquiry is
determining what that language means based on the facts of this litigation. Having
considered the testimony and evidence presented at trial, I conclude that the most
reasonable interpretation of the phrase ―join in the licenses granted‖ used in the Meso
consent is that it was something more than a simple consent, but less than making Meso a
party to the License Agreement or to Article 2 of that agreement. Specifically, I find that
the phrase was included to emphasize Meso‘s consent to the license that IGEN was
granting to Roche, both under the circumstances that existed at the time of the 2003
192
Meso also argued that any ambiguity in the meaning of the phrase ―join in the
licenses granted‖ should be construed against Roche under the doctrine of contra
proferentem. As an initial matter, I do not consider it appropriate to apply the
doctrine of contra proferentem to this dispute because the License Agreement and
the consent both were negotiated heavily by sophisticated entities with the
assistance of counsel. See Sci. Applications Int’l Corp. v. State, 876 N.Y.S.2d
182, 184 (App. Div. 2009) (rejecting application of contra proferentem where
―[t]he record reflects that these are sophisticated parties and there is evidence that
they engaged in negotiations as they worked out some of the details of the
contract,‖ and the ―[c]laimant failed to establish that it had no voice in the
selection of [the contractual] language.‖) (internal quotation marks and citations
omitted). Regardless, the doctrine ―is a rule of construction that should be
employed only as a last resort.‖ Birdsong Estates Homeowners Ass’n, Inc. v.
D.P.S. Sw. Corp., 957 N.Y.S.2d 785, 787 (App. Div. 2012). Because the parol
evidence presented at trial establishes that Meso was not intended to be a party to
the License Agreement and that Roche has asserted the more reasonable
interpretation of the ―join in‖ language, I find it unnecessary to utilize the doctrine
here as a ―last resort.‖
70
transaction and any changed circumstances that might result if Meso‘s ―springing rights‖
were triggered in the future.
The record shows that Meso‘s undeniable, but ill-defined (from a practical
perspective),193 ECL-related rights were a concern to Roche as it attempted to negotiate a
new license with IGEN. In having Meso ―consent to and join in‖ the licenses that IGEN
was granting to it, Roche neither sought nor received a grant of rights from Meso, but,
rather, called special attention to and emphasized the fact that Meso agreed to accept
Roche‘s use of the Licensed ECL Technology within the Field.194 Roche considered this
emphasis, or ―calling out,‖ significant in that it would make it that much more difficult
for Meso to challenge successfully Roche‘s use of Licensed ECL Technology within the
Field.195 Because of the uncertainty surrounding Meso‘s rights, I conclude that Roche‘s
193
See, e.g., JTX 62 at ROCHE0036626 (Roche December 2001 due diligence
memorandum); JTX 207 at WH0009159 (Roche July 2003 due diligence
memorandum). While these due diligence memoranda are persuasive evidence
that Roche knew or believed that Meso had ECL-related rights, they were
prepared as part of Roche‘s evaluation of acquiring IGEN, not of receiving a
license from it. As a result, those documents have little probative value on the
question of the meaning of the ―join in‖ language.
194
See Tr. 603–04 (Steinmetz) (―Q: And when you included that phrase ‗join in‘ into
the consent, what meaning did you intend that phrase to have? A: I meant that
phrase to refer to the two granting clauses in this final version of the license
agreement. The purpose of the words were to have -- to call out the two important
granting clauses, and to have MSD and MST say not just, it‘s ok, but we agree
with what IGEN is doing in those granting clauses.‖).
195
Another example may be of assistance. Assume two parties have a contract
containing an exclusive, mandatory forum selection clause in favor of Delaware.
Assume further that the same contract also contains language forbidding either
party from initiating a lawsuit related to the agreement in any non-Delaware court.
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interpretation of the ―join in‖ phrase does not render that phrase meaningless or
superfluous. Rather, the language could prove valuable to Roche (and IGEN for that
matter) in terms of helping them defend against a suit from Meso challenging some
aspect of Roche‘s in-Field use of the Licensed ECL Technology or any inadvertent out-
of-Field use by one of Roche‘s customers.
This emphasis also was particularly important to Roche because of Meso‘s
―springing rights.‖ Even assuming that Meso had no relevant in-Field ECL rights at the
time of the 2003 transaction, an issue I need not and do not reach, Roche knew it was
possible that Meso‘s ―springing rights‖ could be triggered after the 2003 transaction,
giving Meso exclusive rights in some or all of the ECL Technology that IGEN licensed to
Roche under the License Agreement. Consequently, absent a consent or other agreement,
Meso conceivably could be in a position at some point to challenge Roche‘s use of the
ECL Technology, both inside and outside of the Field, notwithstanding the License
Agreement. By having Meso ―consent to and join in the licenses granted,‖ Roche not
only was asking Meso to consent to the License Agreement as it was, but also to
acknowledge Roche‘s ability to continue to use the Licensed ECL Technology in the
Arguably the additional language proscribing litigation outside of Delaware is
unnecessary because a lawsuit filed outside of Delaware would be a clear breach
of the exclusive, mandatory forum selection clause, regardless of whether the
additional language is present. That, however, does not make the additional
language meaningless or superfluous. If one of the parties filed a lawsuit against
the other outside of Delaware, the additional language could provide valuable
additional support for the other party‘s argument that the non-Delaware suit
should be dismissed or enjoined.
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Field for the duration of the Agreement, even if its potential ―springing rights‖ in
Licensed ECL Technology later came to fruition. Thus, Roche was able to secure the
protection it wanted from Meso‘s ability to challenge its use of the ECL Technology in
the Field without actually receiving a grant of rights from Meso or making it a party to
the License Agreement.
That does not mean, however, that Roche had free rein to use the Licensed ECL
Technology as it saw fit. There is no evidence that, in connection with the 2003 License
Agreement or otherwise, Meso ever consented to or ―joined in‖ any authorization for
Roche to operate outside of the Field, regardless of whether Roche had another license to
do so. Therefore, to the extent Roche may have chosen to operate deliberately outside of
the Field, it ran the risk that it may be infringing on Meso‘s intellectual property rights by
practicing Meso‘s ECL technology without having either Meso‘s consent or an effective
license to do so. Meso conceivably may have viable infringement or other claims against
Roche for its actions since 2007, when it allegedly began operating deliberately outside
of the Field. The question of whether Roche infringed on Meso‘s ECL-related
intellectual property rights, however, is distinct from, and has no bearing on, the breach
of contract claim that Meso pursued at trial in this litigation.
Applied to the terms of the License Agreement, Roche‘s interpretation of the
clause in the consent attached to that agreement that Meso ―consent[ed] to and join[ed] in
the licenses granted to Roche in the License Agreement‖ also allows for a more logical
reading of the agreement as a whole than Meso‘s interpretation. For example, as Meso
itself notes, the license grant in Section 2.1 of the License Agreement is ―subject to the
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terms and conditions of‖ the agreement as a whole. If Meso is a party to Article 2, or
even just Section 2.1, what other ―terms and conditions‖ would it be subject to? It
already has been determined definitively and preclusively that Meso is not a party to the
agreement‘s arbitration provision. Meso has not offered any principled means of
deciding which, if any, other parts of the License Agreement it would be subject to.
Another example would be Section 14.11 of the License Agreement. Under that section,
the ―Parties,‖ a term defined to include only IGEN and Roche, may receive any ―benefit,
right or remedy‖ under the License Agreement. If Meso were a party with enforcement
rights as to that section based on having joined in Section 2.1, for example, Section 14.11
impermissibly would be rendered meaningless. Conversely, reading the License
Agreement such that Meso is a party, but not subject to Section 14.11, would lead to a
similarly incongruous result.196
196
Another example of an anomalous outcome of finding Meso to be a party to some
or all of the License Agreement is that, from an enforcement perspective, Meso
would have more rights than IGEN or BioVeris had under the agreement. If
before 2007 IGEN or BioVeris believed that Roche was selling ECL products
outside of the Field deliberately and in breach of the License Agreement, under the
plain language of Section 6.2(b), IGEN or BioVeris would have had to pursue any
such ―breach of contract‖ claim through arbitration. JTX 263 § 6.2 at
ROCHE0055871–72. Because Meso already has been determined conclusively
not to be a party to Section 6.2, if it could enforce the License Agreement as a
party, it could do so, as it is seeking to do here, through litigation -- something that
neither IGEN nor BioVeris could do. In essence, Meso contends that it was
understood and agreed by Roche, IGEN, and Meso that, to the extent Meso could
enforce the License Agreement, it could do so differently than IGEN or BioVeris
could. But, Meso has cited no evidence or case law that supports that position.
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Finally, I note that Roche and IGEN were careful to ensure that Meso did not
undertake any obligations directly under the License Agreement itself. That is, to the
extent Meso assumed any obligations to Roche or IGEN pertaining to the License
Agreement, it did so only as part of its consent. This is evidenced by, among other
things, the facts that: (1) Meso did not have a signature block next to those of Roche and
IGEN at the end of the License Agreement and, instead, had its signature block beneath
the attached consent; (2) Meso is not mentioned in any of the License Agreement‘s
substantive provisions; (3) unlike its undertaking in the ―joinder‖ to the Ongoing
Litigation Agreement, Meso never agreed to be treated as if it were IGEN for any
purpose under the License Agreement; and (4) Meso made certain representations and
warranties in the consent that would be entirely superfluous and unnecessary if it
effectively had subscribed to the representations and warranties of the licensor contained
in the body of the License Agreement. Therefore, the holding in Institut Pasteur v.
Chiron Corp., upon which Meso relies, is inapposite to the facts of this litigation.197
197
Even if I had concluded that Meso obtained some type of party status as a result of
the ―join in‖ language in the consent, I still would not be persuaded that Meso
would have rights to enforce the License Agreement. Based on the lack of any
discussion surrounding Meso‘s ability to enforce the License Agreement and the
fact that Meso never specified the scope of the rights it purportedly was licensing
to Roche, it appears that, at most, Meso granted Roche something analogous to a
―quitclaim‖ license. Under such a license, Meso simply would have granted any
rights in ECL Technology with respect to the Field that it had to Roche without
making any representations as to what rights it actually had. See, e.g., Fenn v.
Yale Univ., 283 F. Supp. 2d 615, 638-39 (D. Conn. 2003). A quitclaim license,
however, like a quitclaim deed, is essentially a unilateral grant of rights; it would
not have given Meso enforcement rights under the License Agreement or
otherwise.
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In sum, construing ―join in‖ in accordance with Roche‘s interpretation: (1)
effectuates the intent of the parties, as established by the weight of evidence presented at
trial; (2) gives meaning to both ―consent to‖ and ―join in;‖ (3) does not create any
inconsistencies in the License Agreement or render any of its provisions meaningless;
and (4) avoids giving undue weight to a few words in a consent that is attached to a
heavily negotiated, complete agreement between Roche and IGEN. Therefore, I accept
Roche‘s interpretation of the ―join in‖ language contained in the consent, and,
accordingly, I reject any interpretation of the ―join in‖ language that either would make
Meso a party to the License Agreement or endow Meso with any enforcement rights
thereunder.
The trial in this dispute related solely to Count II of the Complaint, Meso‘s breach
of contract claim. As such, all of the evidence presented at trial related to the issues of
whether Roche breached Meso‘s rights under the 2003 License Agreement and, if so, to
what extent Meso has been harmed by that alleged breach. Because I have concluded
that Meso was not a party to the License Agreement and did not have any right to enforce
the agreement, Meso has failed to prove the first element of its breach of contract claim.
Therefore, I reject Count II of Meso‘s complaint on the merits and do not reach the issue
of damages.
III. CONCLUSION
For the foregoing reasons, I conclude that neither MSD nor MST was a party to
the 2003 License Agreement, and, thus, Meso has no right to enforce the 2003 License
Agreement against Roche. Accordingly, Meso has failed to prove its breach of contract
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claim, and I will enter judgment in favor of Defendants on Count II of the Complaint and
dismiss that claim with prejudice. An appropriate Order and Final Judgment is being
entered concurrently with this Memorandum Opinion.
77