This article was published in Law360 on December 10, 2018. © Copyright 2018, Portfolio Media, Inc., publisher of Law360. It is republished here with permission.
A Delaware Chancery Court on Monday tossed a biotech firm’s suit seeking $100 million in losses and triple damages from the German-based parent of Fraunhofer USA Inc. for fraudulent use and theft of its intellectual property, finding that the firm correctly sued the German parent in chancery court but moved too late to protect its claims.
Because German-based Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V., or FhG, purportedly knew and approved of its American affiliate’s withholding of intellectual property and related materials belonging to iBio Inc., the German parent could not escape the suit brought against it for lack of personal jurisdiction, Vice Chancellor Tamika Montgomery-Reeves said.
However, the case must still be dismissed for iBio’s failure to bring its claims against FhG within three years of being aware of the alleged theft of its intellectual property, among other claims it had brought in its November 2017 suit, the vice chancellor said, noting that iBio knew of the claims at least by June 2014 and was thus barred under the doctrine of laches.
“IBio’s complaint shows that although iBio may not have known the full extent of (1) FUSA’s breaches of its contracts with iBio or (2) FhG’s involvement in the breaches, iBio had at least inquiry notice that FhG had a role in FUSA’s breaches,” the decision reads.
According to iBio, which specializes in the development of plant-based pharmaceuticals, the chancery court had already found in July 2016 that iBio alone owned patented and unpatented technologies shared or developed with Fraunhofer USA’s Delaware research site between 2003 and Dec. 31, 2014.
But although Vice Chancellor Montgomery-Reeves’ decision at the time appeared to fall squarely in iBio’s favor, iBio accused Fraunhofer of continuing to violate the meaning of the court’s finding, including refusing to comply with iBio demands for access to its intellectual property and related materials.
The November 2017 suit homed in on FhG as “complicit” in and party to Fraunhofer USA’s conduct. The German firm is one of the world’s most successful applied research firms, according to iBio, with $3 billion in assets and $2 billion in operating revenues.
“Fraunhofer misappropriated iBio’s technology for its own gain, flagrantly refused to provide technology transfer to iBio, and continues to this day to publicly offer iBio’s technology to other parties,” the lawsuit reads.
According to the complaint, FhG represented through its U.S. operation that it would conduct research and development “on iBio’s behalf and for iBio’s exclusive ownership.” But Fraunhofer instead allegedly entered into secret biopharmaceutical development deals that undermined iBio’s rights and opportunities for commercial development.
Instances cited in the suit include Fraunhofer moves that used iBio’s own technologies to elbow iBio out of a contract for Ebola vaccine development with the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority. Other promising drug development prospects harmed by FhG included projects focused on yellow fever and breast cancer vaccines and therapeutics, iBio said in its suit.
IBio had accused FhG of fraud, conspiracy, misappropriation of trade secrets, unjust enrichment, tortious interference with a contract and a separate count of tortious interference with a prospective economic advantage.
Counsel for both parties did not immediately respond to requests for comment Monday.
IBio is represented by David E. Ross and Eric D. Selden of Ross Aronstam & Moritz LLP and Reed S. Oslan, Mark Premo-Hopkins, Britt Cramer, Allison McDonald, Inbal Hasbani and Kyla Jackson of Kirkland & Ellis LLP.
FhG is represented by M. Duncan Grant, Christopher B. Chuff, James H.S. Levine and Ellis E. Herington of Pepper Hamilton LLP.
The case is iBio Inc. v. Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V., case number 2017-0790, in the Court of Chancery of the State of Delaware.