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Arcadia Biosciences, Inc. v. Vilmorin & Cie
Citation: 356 F. Supp. 3d 379Docket: 18-cv-8059 (JSR)
Court: District Court, S.D. Illinois; January 24, 2019; Federal District Court
The excerpt outlines an international patent dispute involving Arcadia Biosciences, Inc. ("Arcadia") and defendants Vilmorin, Cie., Vilmorin Limagrain Céréales Ingrédients SA ("LCI"), and Arista Cereal Technologies Pty Limited ("Arista"). Arcadia claims it developed genetically modified wheat with health benefits and shared this information with the defendants under a nondisclosure agreement. The defendants allegedly misused this information to file patents and create other products, prompting Arcadia to file federal patent claims for correction of inventorship, alongside various state contract and tort claims.
Arcadia initiated the complaint on September 4, 2018, and the defendants responded with motions to dismiss, citing lack of personal and subject matter jurisdiction and failure to state a claim. Following the filing of Arcadia's First Amended Complaint on October 26, 2018, the court conducted oral arguments on January 7, 2019. On January 11, 2019, the court issued a ruling dismissing Arcadia's claims against Arista due to lack of personal jurisdiction and dismissed its claims against Vilmorin and LCI with prejudice for failure to state a claim.
The background indicates that Arcadia, a Delaware corporation based in California, specializes in developing agricultural products. Vilmorin and LCI are French companies involved in plant research and breeding, while Arista is an Australian joint venture with LCI. Arcadia's research includes the development of high amylose wheat, which offers health benefits due to its slow digestion compared to amylopectin. The genetic modifications involved targeting the SBEIIa gene responsible for amylopectin formation.
Bread wheat consists of three genomes (A, B, and D), each containing the SBEIIa gene, with two copies of each. Arcadia mutated these copies to reduce amylopectin production in the grain's endosperm, which increased the amylose-to-amylopectin ratio. On November 13, 2009, Arcadia entered into a Confidentiality and Nondisclosure Agreement (NDA) with Vilmorin for potential collaboration, binding both Vilmorin and its affiliates. Under the NDA, Arcadia shared its high amylose wheat technology with Vilmorin and LCI employees, including Elisabeth Marie-Anne Ida Chanliaud.
Between 2011 and 2013, Arista filed three U.S. patent applications, leading to three patents related to high amylose wheat. Arcadia alleges that some disclosed information is claimed in these patents, while other shared information is likely misused by the defendants. Arcadia contends that Arista's provisional patent application from November 4, 2010 indicated its failure to develop a viable version of the mutated wheat, which it claims was remedied only through the confidential information Arcadia provided.
Arcadia asserts that the filing of Arista's patent applications constitutes a breach of the NDA and that the defendants have engaged in unfair competition and interference, damaging Arcadia's business and reputation. On September 4, 2018, Arcadia filed an initial complaint against Arista, Vilmorin, and LCI, followed by a First Amended Complaint (FAC) on October 26. The FAC includes federal patent claims against Arista for correction of inventorship and state law claims for breach of contract, implied covenant of good faith and fair dealing, unfair competition, misappropriation of confidential information, unjust enrichment, conversion, and tortious interference.
On October 17, Arista filed a motion to dismiss Arcadia's complaint, citing lack of personal jurisdiction, lack of subject matter jurisdiction, and failure to state a claim. Concurrently, Vilmorin and LCI also moved to dismiss on the grounds of failure to state a claim. Following Arcadia's filing of the First Amended Complaint (FAC) on November 5, the defendants submitted supplemental briefs supporting their motions, which Arcadia opposed.
The court granted Arista's motion to dismiss for lack of personal jurisdiction and Vilmorin and LCI's motion for failure to state a claim. Under Rule 12(b)(2), the burden is on the plaintiff to show that personal jurisdiction exists, and a prima facie showing is sufficient unless an evidentiary hearing is conducted. The court evaluates the pleadings in favor of the plaintiff. In patent cases, personal jurisdiction inquiries typically follow Federal Circuit law, which aligns with the Second Circuit's approach.
The jurisdiction analysis involves determining if the defendant is subject to the forum state's long-arm statute and whether exercising jurisdiction complies with due process. Arcadia contended that jurisdiction over Arista was established through a New York forum selection clause in a Non-Disclosure Agreement (NDA) with Vilmorin, arguing that Arista is bound as an affiliate. However, Arista is not a party to the NDA, and the court examined the definitions of "affiliate" and "control" within the NDA to assess the validity of Arcadia's claims regarding jurisdiction.
Groupe Limagrain Holding SA holds a majority of the stock in both Vilmorin and LCI, and LCI acquired a majority of Arista's stock in 2017. Arcadia asserts that Vilmorin and Arista have been under common control since 2017, thus binding Arista to the non-disclosure agreement (NDA) with its associated forum selection clause. The NDA is designed to bind current and future affiliates. However, the court must evaluate if enforcing this clause against a party that was not an affiliate at the time of the NDA's signing is consistent with New York contract law and federal due process. Under New York law, a contract cannot bind a non-party unless specific conditions are met, such as agency, assignment, or alter ego status. Arcadia has not claimed that Vilmorin acted as Arista's agent or that it assigned the NDA to Arista, nor has it shown that Arista assumed the NDA's obligations. Arcadia referenced cases suggesting that parties can bind future affiliates, notably VKK Corp. v. National Football League and Ellington v. EMI Music, which may influence the court's decision.
The district court granted summary judgment for the defendants based on a release signed by the plaintiffs, which discharged the NFL and its affiliates from all claims, past and future. The release explicitly stated that it covered all actions or claims from the beginning of time to the date of the release. However, the Second Circuit vacated part of this judgment, determining that two defendants associated with the Jacksonville Jaguars were not NFL members when the release was signed, thus allowing plaintiffs to sue them. The court noted that the release language did not suggest an intention to include future member clubs and emphasized that the NFL and its clubs could have explicitly referenced them if intended. The case VKK was deemed irrelevant, as the court did not find any non-parties bound by the release or that the plaintiffs were precluded from suing non-parties. Similarly, the Ellington case involved a dispute over royalties under a copyright renewal agreement, where the court ruled that EMI Music, Inc. was only required to remit net revenue it actually received and not amounts retained by foreign subpublishers. Consequently, the dismissal of the plaintiffs' claims against EMI was upheld, affirming the interpretation of the contractual language.
The court determined that the affiliated foreign subpublishers were not considered members of the "Second Party" under the contract, as they did not fall within the definition of "any other affiliate of Mills Music, Inc." The court emphasized the necessity of explicit language to bind future affiliates, stating that the term "affiliate" encompasses only those that existed at the time the contract was executed. Counsel for Arcadia referenced this interpretation to argue that Arista, as a future affiliate, was bound to the NDA. However, the court clarified that while explicit language was necessary to bind future affiliates, it was not sufficient on its own. The precedent set by Ellington indicated that parties could bind non-parties in certain circumstances, such as agency relationships, but did not establish a broad authority to bind future entities without clear contractual intent. The trial court noted that EMI's predecessor could not commit to binding entities that were not yet affiliated. Additionally, Arcadia argued that even if the previous cases did not support binding future affiliates, a separate line of cases allows for the enforcement of forum selection clauses against non-signatories. The court referenced Aguas Lenders Recovery Group v. Suez, which acknowledged that non-signatories could be bound by forum selection clauses if they are successors to the contractual obligations of a predecessor. However, the court concluded that Arcadia had not demonstrated how Arista could be bound to the NDA under established contract law principles.
The Aguas court referenced various circuit decisions illustrating circumstances under which forum selection clauses can be enforced against non-signatories. Notably, the Ninth Circuit in *TAAG Linhas Aereas de Angola* ruled that a non-signatory plaintiff, as a third-party beneficiary, could be bound by such clauses. Similarly, the Eighth Circuit in *Marano Enterprises of Kansas* held that non-signatory plaintiffs closely related to the agreements could also be bound, based on the foreseeability of their being affected by the clause. This aligns with contract law principles, which maintain that third-party beneficiary status does not exempt parties from enforceable contractual provisions. Additionally, enforcement against "closely related" non-signatory plaintiffs is justified since their interests often derive from those of the signatory plaintiffs.
Some lower courts have extended this rationale to allow enforcement against non-signatory defendants, even when they challenge personal jurisdiction. However, the Aguas court chose not to adopt this approach, noting that the cases it cited dealt with improper venue and forum non conveniens, rather than personal jurisdiction issues. The court emphasized that the latter is governed by constitutional constraints regarding the court's authority over parties, requiring evidence of minimum contacts with the forum that align with principles of fair play and substantial justice, unlike the more flexible considerations involved in venue decisions.
A court cannot exercise personal jurisdiction over a defendant unless the defendant has purposefully engaged in activities within the forum state, thereby benefiting from its laws, as established in *Hanson v. Denckla*. The application of forum selection clauses to non-signatories is cautioned against due to constitutional requirements. While such clauses provide benefits like certainty in commercial transactions and judicial efficiency, they cannot be enforced unless jurisdiction aligns with due process, which necessitates "minimum contacts" with the forum state. The determination of minimum contacts focuses on the defendant's relationship with the forum and the litigation, not on the plaintiff's or third parties' contacts. In this case, Arcadia failed to establish any meaningful connection between Arista, an Australian entity with no presence in New York, and the state. The only contact cited was a 2009 NDA involving a company related to Arista, which is insufficient to justify jurisdiction. Even if the court were open to enforcing forum selection clauses against closely related non-signatories, Arcadia did not demonstrate that such enforcement was foreseeable, especially given that a separate confidentiality agreement governed by Australian law existed between Arcadia and Arista. Consequently, Arista's motion to dismiss for lack of personal jurisdiction is granted, and all claims against Arista are dismissed without prejudice to being reinstated in a forum with appropriate jurisdiction. Additionally, Vilmorin and LCI's motion to dismiss for failure to state a claim is also mentioned, requiring that a plaintiff must present a claim that is plausible on its face to survive such a motion, as stated in *Ashcroft v. Iqbal*.
A claim is considered facially plausible when the plaintiff provides factual content that enables the court to reasonably infer the defendant's liability for the alleged misconduct. In evaluating a motion to dismiss, the court accepts all factual allegations in the complaint and draws reasonable inferences in favor of the plaintiff. Arcadia has brought multiple claims against Vilmorin and LCI, including breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition, misappropriation of confidential information, unjust enrichment, conversion, and tortious interference. The court finds that all claims are either time-barred or inadequately pled, leading to the decision to grant Vilmorin and LCI's motion to dismiss the First Amended Complaint (FAC) with prejudice.
For a breach of contract claim under New York law, the plaintiff must show the existence of an agreement, adequate performance, breach by the defendant, and resulting damages. Arcadia alleges a breach of a Non-Disclosure Agreement (NDA) by Vilmorin and LCI through the misuse and disclosure of confidential information regarding Arcadia's high amylose wheat invention. The NDA restricts the disclosure and use of confidential information to specific purposes related to potential business discussions.
Arcadia claims two instances of breach: first, that the defendants misused and disclosed confidential information by claiming it in Arista's patents, and second, that they used the confidential information to support their commercial products. In response, the defendants argue that Arcadia's breach of contract claim is time-barred under both New York’s six-year and California’s four-year limitations periods due to New York's borrowing statute. Arcadia contends that New York’s statute of limitations should apply instead, as the NDA states it is governed by New York law, and asserts there is a factual question regarding the parties' intent regarding the borrowing statute’s applicability. The court, however, disagrees with Arcadia's assertion about the intent.
The New York Court of Appeals emphasizes that the written terms of an agreement are the best evidence of the parties' intentions. In this case, the Non-Disclosure Agreement (NDA) specifies that it is governed by New York law, which includes the borrowing statute. While the NDA states it will be construed without regard to conflict of laws principles, recent court decisions indicate a distinction between common-law conflicts and statutory issues, particularly regarding the statute of limitations under CPLR 202, which is part of New York's procedural law.
For Arcadia's breach of contract claim to be timely under New York's borrowing statute, it must comply with both New York and California's statutes of limitations. Under California law, such claims must be filed within four years, starting from the breach date, regardless of the plaintiff's awareness of the breach. Defendants argue that Arcadia's claim is time-barred because it allegedly knew or should have known of the breach when Arista's patent applications were published on February 13, 2014, yet filed suit over four years later, on September 4, 2018.
Arcadia contends its claim is timely, asserting breaches occurred as recently as 2018, involving misuse and disclosure of confidential information related to Arista's patents and other proprietary information to support the launch of the defendants' products. Arcadia argues that the exact timing of these breaches is known only to the defendants, indicating the existence of factual disputes regarding the date of accrual.
Discovery is deemed necessary in this case, but speculating about potential findings cannot circumvent statutes of limitations. The First Amended Complaint (FAC) fails to provide concrete examples of how defendants misused or disclosed confidential information not claimed in Arista's patents. During oral arguments, Arcadia's counsel could not specify any instances of alleged misconduct. Although the FAC attempts to outline the types of confidential information shared, it merely asserts that Arcadia believes the defendants are misusing this information for their business activities and claims that further discovery of the defendants' internal records is essential to fully understand the extent of these misuses. This approach is characterized as a "fishing expedition," insufficient for establishing the defendants' conduct within California's statute of limitations.
Arcadia's breach of contract claim is deemed untimely under California law and also barred under New York's borrowing statute. Even if New York's six-year statute of limitations for breach of contract applied, Arcadia's claim would still be barred, as the limitations period begins when the cause of action accrues, which is at the time of the breach. Arcadia alleges that the defendants breached their non-use obligations under the Non-Disclosure Agreement (NDA) by no later than when the Arista Patent Applications were filed. The relevant patent applications were filed on November 4, 2011, November 2, 2012, and August 6, 2013. While the later applications may seem timely, they were preceded by earlier provisional or Patent Cooperation Treaty (PCT) applications filed outside the statute of limitations. Defendants contend that any alleged misuse of confidential information in preparing the later applications also occurred during the preparation of the earlier ones, asserting that the breach occurred when they first pursued their patent applications. Arcadia counters that its claim did not accrue with the filing of earlier applications, citing that one provisional application did not reference specific "point mutations."
Arcadia's claim of breach of contract is dismissed with prejudice as it is time-barred, stemming from the filing of a provisional patent application on November 4, 2010, which was one of four related applications filed outside the statute of limitations. Defendants argue that these earlier applications referenced "point mutations" and that Arcadia failed to counter the claim that any confidential information was misused during their preparation. The court emphasizes that the central issue is whether confidential information was misused, regardless of whether the provisional applications conferred any patent rights.
Additionally, Arcadia's claim of breach of the implied covenant of good faith and fair dealing is also dismissed as time-barred for the same reasons. Under both California and New York law, the statutes of limitations for breach of contract and breach of the implied covenant are identical. The core of both claims revolves around the allegation that defendants improperly used Arcadia's confidential information to file patent applications. Even if the implied covenant claim were not time-barred, it would be dismissed as redundant, as its basis overlaps with the breach of contract claim. Arcadia contends that its implied covenant claim involves additional conduct beyond the breach of contract, particularly regarding the prosecution of patent applications, but this argument does not alter the court's analysis.
Arcadia's claim under the implied covenant of good faith and fair dealing, asserting that the NDA implicitly prohibits either party from filing patent applications based on shared confidential information, was deemed unpersuasive by the Court. The NDA explicitly restricts the disclosure and use of confidential information, which does not extend to patent filings. Consequently, the Court concluded that Arcadia's implied covenant claim mirrored its contract claim, resulting in the dismissal of the implied covenant claim with prejudice.
Regarding unjust enrichment, the Court highlighted that such claims require proof of enrichment at the plaintiff's expense and an equitable obligation from the defendant to the plaintiff. Unjust enrichment claims are only applicable in exceptional circumstances where no breach of contract or recognized tort has occurred. Because a valid contract governs the subject matter of the case, recovery for unjust enrichment is precluded if it merely duplicates a contract claim. Arcadia alleged that the defendants improperly benefited from Arcadia's inventions and confidential information, leading to unfair competition. However, the defendants argued that the unjust enrichment claim was time-barred and duplicative of the breach of contract claim. The Court concurred with the defendants, leading to the dismissal of Arcadia's unjust enrichment claim with prejudice.
To establish a claim for misappropriation of confidential information, a plaintiff must show that the defendant utilized the plaintiff's confidential information to gain a competitive edge. When both parties are bound by a contract, the plaintiff must assert a breach of a duty that exists independently of the contractual obligations. Arcadia alleges that the defendants are misusing confidential information shared under a Non-Disclosure Agreement (NDA) to enhance their own commercial development and unfairly compete against Arcadia, violating its rights. Specifically, Arcadia claims that the defendants’ use and disclosure of this information in filing patent applications for the '722 Patent and '413 Patent breached their confidentiality duties. Additionally, Arcadia contends, based on available information, that the defendants have misappropriated other confidential information disclosed under the NDA, which is not claimed in the patents.
Defendants argue that Arcadia's misappropriation claim is both time-barred and duplicative of its breach of contract claim. They assert that misappropriation claims must be filed within three years of the defendant's disclosure or use of the plaintiff's ideas, citing that the last relevant patent application was filed in 2013, making the claim time-barred by 2016. Furthermore, they contend that under New York law, tort claims cannot be simply reclassified from contract claims unless based on an independent duty, which they claim Arcadia has not established.
In response, Arcadia argues that its misappropriation claim is based on the defendants' misuse of Arcadia's information for improper commercial advantage, with conduct occurring as recently as 2018, including interference with business relationships and public statements that harmed Arcadia. Arcadia maintains that its misappropriation claim is distinct from its breach of contract claim, asserting that the defendants took additional actions beyond contractual obligations that harmed Arcadia.
Defendants are accused of misusing Arcadia's confidential information for commercial gain, violating a duty of confidentiality stemming from their relationship with Arcadia. However, the Court finds Arcadia's claims unconvincing and notes that Arcadia has not sufficiently alleged any misuse beyond the context of Arista's patents. The allegation related to Bay State Milling does not alter this conclusion. Arcadia's assertion of an independent duty of confidentiality is deemed redundant, as it is already covered under the Non-Disclosure Agreement (NDA). Consequently, Arcadia's misappropriation claim is dismissed with prejudice due to being duplicative and time-barred.
Regarding unfair competition, Arcadia claims defendants misrepresented themselves as the sole inventors and owners of the Arcadia Invention and improperly used confidential information, leading to consumer confusion. However, defendants argue that Arcadia's claim is also time barred under New York law, which establishes a three-year statute of limitations for unfair competition claims based on misappropriation. The Court agrees with the defendants, resulting in the dismissal of Arcadia's unfair competition claim with prejudice.
In terms of conversion under New York law, it is defined as the intentional and unauthorized control over someone else's personal property that interferes with their right to possess it.
Only tangible property typically qualifies for conversion actions, although intangible rights can lead to conversion damages when they are embodied in a document. In the case of Ancile Inv. Co. v. Archer Daniels Midland Co., Arcadia claims that the Defendants converted its property by assigning the Arista Patents in full to Arista and misusing confidential information disclosed under a Non-Disclosure Agreement (NDA) to unfairly compete. Defendants argue for dismissal, asserting that Arcadia's conversion claim is based on the misuse of intangible property. In response, Arcadia contends that electronic data can constitute the subject of a conversion claim, citing Thyroff v. Nationwide Mut. Ins. Co. to support its position that its intellectual property, transmitted in electronic formats, is actionable.
The court acknowledges that New York law allows conversion claims for electronic records akin to printed documents. However, it distinguishes between an electronic record of an intangible interest and the intangible interest itself, as established in cases like Harris v. Coleman and Grgurev v. Licul. In Harris, a claim for the conversion of patent ownership records was permissible, but claims about the patentable idea itself were not. Similarly, in Grgurev, the court ruled that misappropriation of a trademark could not ground a conversion claim, as trademarks are intangible intellectual property without tangible existence. Ultimately, the court finds that Arcadia cannot assert a conversion claim for its intellectual property based on the precedents discussed.
Arcadia's conversion claim is dismissed with prejudice as there are no allegations of misappropriation of ownership records. Under New York law, a tortious interference claim requires proof of: 1) existing business relations with a third party, 2) defendants' interference with those relations, 3) wrongful intent or improper means by the defendants, and 4) injury to the relationship. Arcadia claims defendants publicly misrepresented ownership of the Arista Patents, which discouraged potential partners from collaborating with them, specifically citing interference with a commercial agreement with Bay State Milling in 2018. Defendants contend that Arcadia fails to demonstrate it would have entered into a relationship but for their interference. While Arcadia asserts it had an opportunity to contract with Bay State Milling, the court finds this claim to be conclusory and lacking specific factual support. Consequently, Arcadia's tortious interference claim is also dismissed with prejudice. The court grants Arista's motion to dismiss for lack of personal jurisdiction and Vilmorin and LCI's motion for failure to state a claim, allowing claims against Arista to be refiled in a proper jurisdiction but dismissing all claims against Vilmorin and LCI with prejudice. Final judgment is entered to close the matter.
The Court has determined it lacks personal jurisdiction over Arista, leading it to not consider Arista's motions regarding subject matter jurisdiction and failure to state a claim. Arcadia argued that LCI's substantial ownership interest in Arista could imply an earlier affiliation with Vilmorin, but the NDA specifies that LCI must control Arista's board to establish this affiliation, which Arcadia failed to demonstrate. The Court noted that exceptions to the successor liability doctrine do not apply, as Arista is not a successor to Vilmorin. For successor liability to exist, there must be an agreement to assume debts, fraudulent transactions, a de facto merger, or mere continuation of the selling company, none of which are present here. The Court referenced various cases cited by Arcadia, concluding that they do not support its claims. Specifically, the cases emphasize the need for clear intent to bind future affiliates, which was not established. Additionally, the Court clarified that a non-signatory can enforce a forum selection clause against a signatory if closely related, but noted that the relationship between Vilmorin and Arista is horizontal, making such enforcement less likely.