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United States v. Cytogel Pharma, LLC

United States District Court, E.D. Louisiana

July 20, 2018

UNITED STATES OF AMERICA, ET AL.
v.
CYTOGEL PHARMA, LLC

         SECTION: “E” (1)

          JUDGE SUSIE MORGAN

          ORDER AND REASONS

          MAGISTRATE JUDGE JANIS VAN MEERVELD

         Before the Court is the Motion for Leave to File First Amended and Restated Affirmative Defenses and Second Amended and Restated Counterclaims (Rec. Doc. 195). For the following reasons, the Motion is GRANTED.

         Background

         This lawsuit concerns the ownership of patent rights in certain opioid substitutes. During the relevant period, Dr. Zadina and Dr. Lazlo Hackler[1] (“Dr. Hackler”) were employed jointly by Tulane and the Department of Veterans Affairs (“VA”) and were engaged in developing new compounds that would reduce the side effects associated with opioids. In the 1990s, Dr. Zadina, Dr. Hackler, and Dr. Abba J. Kastin of Tulane University developed a group of cyclic peptide-based opioid compounds (“1st Generation Compounds”), for which two patents were ultimately issued (“1st Generation Patents”). The 1st Generation Patents were assigned to only Tulane because the VA assigned all of its ownership rights to Tulane. In 2003, Cytogel and Tulane entered into a license agreement for the 1st Generation Patents. After this agreement was executed, Dr. Zadina advised Cytogel regarding the properties and characteristics of the 1st Generation Compounds, at first pursuant to an oral agreement, and starting in 2007, pursuant to a written consultancy agreement. This work was performed outside of Dr. Zadina's normal duties for the VA and Tulane. Tulane insists that Dr. Zadina's consultancy never involved work with any opioids other than the 1st Generation Compounds.

         Tulane alleges that Dr. Zadina and Dr. Hackler continued researching peptide-based opioids for the VA and Tulane and eventually invented certain “2nd Generation Compounds, ” which offered reduced side effects and improved solubility relative to the 1st Generation Compounds. Tulane filed a provisional patent application for the 2nd Generation Compounds.[2]After Tulane informed Cytogel of the application, Cytogel asserted that it owned the new application. Cytogel alleges that the 2nd Generation Compounds were developed by Dr. Zadina using confidential Cytogel information. The dispute continued, and eventually Dr. Zadina terminated his consulting agreement in 2013.

         Tulane's provisional application resulted in the issuance of U.S. Patent No. 8, 716, 436 (the “436 Patent”). There are also three patent applications relating to the 2nd Generation Compounds currently pending with the U.S. Patent and Trademark Office (“PTO”) U.S. Patent Application No. 14/268, 057 (the ‘057 Application), U.S. Patent Application No. 14/845, 813 (the ‘813 Application), and U.S. Patent Application No. 14/974, 249 (the ‘249 Application and with the ‘057 Application and the ‘813 Application, the “Related Applications”). According to Plaintiffs, all have been assigned to, and are co-owned by, the VA and Tulane.

         On August 19, 2016, Tulane and the United States filed this lawsuit against Cytogel seeking a declaratory judgment that they are the sole owners of the ‘436 Patent and the Related Applications and that Dr. Zadina and Dr. Hackler are the true inventors of the ‘436 Patent and the Related Applications. Cytogel filed a counterclaim against Tulane, the United States, and Dr. Zadina, alleging that they misappropriated its trade secrets and confidential information. Cytogel seeks a declaratory judgment that it is the owner of the ‘436 Patent and also asserts claims for breach of contract, infringement of the 1st Generation Patents that had been licensed to Cytogel, misappropriation of trade secrets, and other state law claims. Cytogel's amended counterclaim filed on April 11, 2017, stated that “As described in the foregoing paragraphs, the '436 Patent and the '057, '813, and '249 Applications resulted or emerged from materials and information provided to Dr. Zadina by Cytogel, and/or as a result of the consulting process between Dr. Zadina and Cytogel. Therefore, under the Consulting Agreement, Dr. Zadina's interest in the '436 Patent and the '057, '813, and '249 Applications are the property of Cytogel.” (Rec. Doc. 68, Para. 78).

         Cytogel now seeks to amend its affirmative defenses and counterclaim. It proposes to add a claim challenging Dr. Hackler's inventorship of the ‘436 Patent, to assert that Cytogel also owns Dr. Hackler's purported interest in the ‘436 Patent, to clarify that its claims apply to the Related Applications in addition to the ‘436 Patent, and to amend its defenses to be consistent with the counterclaims. Cytogel states it did not make these claims Applications in its original or first amended counterclaim because it lacked sufficient evidence to claim that Dr. Hackler had not invented the ‘436 Patent or Related Applications and it similarly lacked knowledge of facts sufficient to support a claim challenging any interest Dr. Hackler may have with respect to this intellectual property because his work, like that of Dr. Zadina, emerged from Cytogel's confidential information . Cytogel claims it has since obtained sufficient evidence to make this claim. The Plaintiffs oppose Cytogel's proposed amendment.

         Law and Analysis

         1. Standard to Amend Pleadings

         Under Federal Rule of Civil Procedure 15(a)(2), when the time period for amending a pleading as a matter of course has passed, a party may amend its pleadings by consent of the parties or by leave of court. “The court should freely give leave when justice so requires.” Fed. R. Civ. Proc. 15(a)(2). Thus, the United States Court of Appeals for the Fifth Circuit instructs that the “district court must possess a ‘substantial reason' to deny a request for leave to amend.” Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004). Nonetheless, “that generous standard is tempered by the necessary power of a district court to manage a case.” Yumilicious Franchise, L.L.C. v. Barrie, 819 F.3d 170, 177 (5th Cir. 2016) (quoting Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003)). The court may consider numerous factors when deciding whether to grant a motion for leave to amend, including “undue delay, bad faith or dilatory motive on the part of the movant, repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of the amendment.” Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003).

         To determine whether a complaint is futile, courts “apply ‘the same standard of legal sufficiency as applies under Rule 12(b)(6).'” Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863, 872-73 (5th Cir. 2000) (quoting Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000)). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In many cases where futility is not clear, courts find the better course is to grant leave to amend and allow the opposing party to respond to the amended claim with a motion to dismiss or motion for summary judgment. E.g., Tripp v. Pickens, No. 17-CV-0542, 2018 WL 3059614, ...


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