Elenza, Inc. v. Alcon Laboratories Holding Corporation

Citation: 183 A.3d 717Docket: 287, 2017

Court: Supreme Court of Delaware; March 20, 2018; Delaware; State Supreme Court

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Elenza, Inc. appealed a decision from the Superior Court of Delaware regarding a dispute with Alcon Laboratories Holding Corporation and Alcon Research, Ltd. The case centers on the development of an electro-active intraocular lens (EAIOL) intended to address the limitation of standard cataract lenses, which only focus at one distance. Elenza believed its EAIOL could provide multiple focal points without the need for glasses, and entered into a Non-Disclosure Agreement (NDA) and a Stock Purchase Agreement (SPA) with Alcon to collaborate on the project. However, Elenza failed to meet development milestones, and two years later, Alcon filed a patent application for a similar EAIOL and announced a partnership with Google, leading Elenza to sue for breach of contract and misappropriation of trade secrets.

The Superior Court granted partial summary judgment in favor of Alcon, determining that Elenza did not sufficiently support its trade secret claims and limited the damage claims. A jury subsequently ruled against Elenza on its contract claims. On appeal, Elenza contended that the court erred in granting summary judgment, arguing that it had provided enough evidence of the existence and misappropriation of trade secrets. However, the Supreme Court of Delaware affirmed the lower court's decision, agreeing that Elenza did not adequately demonstrate that Alcon improperly used or disclosed its alleged trade secrets.

Alcon initially agreed to acquire 30% of Elenza’s shares for approximately $7.5 million, followed by a second investment contingent on Elenza successfully completing a clinical study and fulfilling certain contractual obligations. In December 2011, Alcon determined that Elenza had not achieved the first milestone, leading to a "Clarification Agreement" that ended their relationship while maintaining confidentiality obligations. Elenza struggled to secure new investors and ceased operations in August 2013, while Alcon continued its research, filing for a patent on an accommodative lens and later announcing a collaboration with Google. 

On March 20, 2014, Elenza sued Alcon for breach of contract and misappropriation of trade secrets. Alcon's motion for judgment on the pleadings was denied, as the Superior Court found potential evidence of trade secret misappropriation. Elenza later amended its complaint to include additional claims but subsequently dropped some before remanding the case to Delaware Superior Court. The court allowed a third amended complaint with seven claims against Alcon and sought $473.7 million in damages based on its enterprise value.

Alcon moved for summary judgment, which the court granted for several claims but denied concerning breach of contract and the implied covenant of good faith, citing unresolved factual issues regarding the Closing Milestone and possible fraudulent inducement. The breach of contract claims proceeded to trial, resulting in a jury verdict in favor of Alcon. Elenza appeals on three grounds: the court's ruling on trade secrets, the denial of lost enterprise damages, and the request for a new trial on its contract claims due to their connection with the trade secrets claims.

The Court reviews the denial of a motion for summary judgment de novo. ELENZA, a new company without products, sales, or regulatory approval, faces challenges in establishing reasonable damages due to its lack of history, making any estimation speculative. Summary judgment is appropriate when, viewing facts favorably for the nonmoving party, there are no genuine material fact disputes, and the movant is entitled to judgment as a matter of law. The movant must provide sufficient evidence for a rational jury to rule in its favor, and unreasonable inferences will not be made in favor of the non-moving party. 

Elenza's failure to raise disputed material facts regarding Alcon's alleged misappropriation of trade secrets is determinative, rendering other appeal issues unnecessary. Under the Delaware Uniform Trade Secret Act, a trade secret is defined as information that derives economic value from not being generally known and is subject to reasonable secrecy efforts. To prove misappropriation, a plaintiff must establish the existence of a trade secret, communication to the defendant with an understanding of secrecy, and improper use or disclosure causing injury. 

Elenza identified its trade secrets as technologies related to an electro-active intraocular lens (EAIOL) process, including hermetic seals, haptics, blink-filter algorithms, and more. However, its expert acknowledged that these technologies are generally known or publicly available. Elenza claimed that its specific combination of these known technologies constitutes a trade secret, focusing on the unique process of integrating components. Despite this, the Court agrees with the Superior Court's finding that Elenza did not present disputed factual issues related to Alcon's alleged trade secret misappropriation.

Under the Delaware Uniform Trade Secret Act, misappropriation involves the unauthorized disclosure or use of a trade secret by someone who obtained it through improper means, had knowledge of its confidential nature, or acquired it by accident or mistake. Elenza claims that Alcon misappropriated its trade secrets regarding the development of EAIOL, citing factors such as Alcon's sudden patent filing after lacking capabilities, emails indicating a desire to leverage Elenza’s information, shared engineers between the two companies, and similarities in technologies. While these elements were adequate at the pleading stage to survive a motion for judgment, they fell short at the summary judgment stage. After extensive discovery, Elenza could only substantiate its claims with two events: the patent application and presentations to Google. However, Elenza failed to demonstrate any material fact suggesting Alcon used its trade secrets in the patent application, as its expert found the document too general and could not cite specific evidence linking it to Elenza’s designs. Similarly, Elenza's expert could not identify any specific confidential information used in Alcon's presentations to Google, which were deemed general in nature. This situation parallels the Savor, Inc. v. FMR Corp. case, where circumstantial evidence suggested motive and opportunity for misappropriation, yet Elenza's claims lacked sufficient backing to establish a triable issue of fact.

The Superior Court determined that Elenza's circumstantial evidence was inadequate to support its claim of trade secret misappropriation against Alcon. Elenza argued that Alcon had the "motive and opportunity" to misappropriate its trade secrets due to a collaboration with Google and the similarity of EAIOL designs. However, the court found that Elenza only established that Alcon "could have" used its designs without providing proof that it actually did. Elenza's reliance on the case Monovis, Inc. v. Aquino was insufficient; while Monovis involved strong circumstantial evidence, Elenza's evidence was deemed too weak and vague. Elenza claimed to have solved various technical challenges in producing EAIOL but failed to detail these challenges or demonstrate that Alcon utilized or disclosed these solutions. The court ruled that Elenza's arguments were speculative and did not raise a genuine issue of material fact regarding Alcon's alleged misappropriation. Consequently, the Superior Court's decision to grant summary judgment in favor of Alcon was upheld, and Elenza's additional claims regarding damages and a new trial were not considered.