Opinion
No. 1:02-cv-005
October 2, 2003
MEMORANDUM
Alexander A. Stratienko, M.D. ("Dr. Stratienko"), a resident of Tennessee, brings this action against Cordis Corporation ("Cordis"), a Florida corporation with its principal place of business in New Jersey, seeking to recover an amount "not less than $1,000,000,000.00." [Court File No. 1]. Dr. Stratienko asserts claims, designated as Counts One through Four respectively, for Breach of Contract (Count One), Common Law Misappropriation/ Conversion/ Wrongful Benefit (Count Two), Trade Secret Theft in violation of Tenn. Code Ann. §§ 47-25-1701 through 47-25-1709 (Count Three), and Inducement of Patent Infringement in violation of 35 U.S.C. § 271(b) (Count Four). [Court File No. 28]. The defendant has moved for summary judgment on the plaintiffs first three claims. [Court File No. 19]. The plaintiff opposes this motion [Court File No. 31], and the defendant has filed a reply brief [Court File No. 33]. For the reasons expressed below, the defendant's motion for summary judgment will be GRANTED. The plaintiffs first three claims will be DISMISSED WITH PREJUDICE.
The plaintiffs claim for Inducement of Patent Infringement (Count Four) was added in the amended complaint. [Court File No. 28]. The claim for Inducement of Patent Infringement is not addressed in the defendant's motion for summary judgment, [Court File No. 19] which was filed prior to the amendment of the complaint. Therefore, the claim is not addressed in this memorandum.
I. Standard of Review
Summary judgment is appropriate where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). In ruling on a motion for summary judgment, the Court must view the facts contained in the record and all inferences that can be drawn from those facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 415 U.S. 574, 587 (1986); National Satellite Sports, Inc. v. Eliadis Inc., 253 F.3d 900, 907 (6th Cir. 2001). The Court cannot weigh the evidence or determine the truth of any matter in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of demonstrating that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To refute such a showing, the non-moving party must present some significant, probative evidence indicating the necessity of a trial for resolving a material factual dispute. Celotex Corp., 477 U.S. at 322. A mere scintilla of evidence is not enough. Anderson, 477 U.S. at 252; McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000). The Court's role is limited to determining whether the case contains sufficient evidence from which a jury could reasonably find for the non-moving party. Anderson, 477 U.S. at 248, 249; National Satellite Sports, 253 F.3d at 907.
II. Facts
The record suggests the following facts when viewed in the light most favorable to the plaintiff.
In May 1999, Dr. Stratienko communicated with William Scheessele at Cordis regarding his desire to have the Cordis produce his medical invention. In September 1999, Dr. Stratienko and Cordis entered a contract entitled "Nondisclosure Agreement." The terms of the agreement generally provided that the information to be disclosed by Dr. Stratienko constituted a trade secret which would be used by Cordis only to conduct an evaluation and communicate the results of the evaluation to Dr. Stratienko. By letter dated December 12, 1999, Dr. Stratienko sent Cordis a copy of his patent application and a description of a "sheath catheter" intended for use in cardiovascular procedures. [Court File No. 32, exh. J]. On or about January 17, 2000, Dr. Stratienko was informed that Cordis would not seek to license Dr. Stratienko's invention.
On April 28, 2000, the Food and Drug Administration ("FDA") approved a Cordis product named the "Vista Brite Tip IG Catheter." [Court File No. 32, exh. O]. By May 29, 2000, seventy-eight Vista Brite Tip IG Catheters had been distributed in the United States. [Court File No. 33, exh. 3]
At issue in this case is the question of who had access to the information provided by Dr. Stratienko and whether that information was subsequently used by Cordis in the development of the Vista Brite Tip IG Catheter. Cordis provides the declarations of both William Scheessele, with whom Dr. Stratienko communicated, and Paul Coletti, an in-house attorney for Johnson Johnson, Cordis's parent company. [Court File Nos. 20 21]. The sworn declarations state that Mr. Scheessele and Mr. Coletti were the only two people to review the information provided by Dr. Stratienko, that they did not disclose the information to any other persons, and they each kept the information secured in their offices when it was not being reviewed.
Dr. Stratienko points to the language of a Cordis interoffice memorandum providing the guideline for Cordis's review of external submissions explaining:
Reviews will be conducted by members of the New Business Development, New Product Strategy, Legal, and to a lesser degree, senior members of RD. It is our goal to minimize exposing our innovative engineering talent pool to external ideas to safeguard our interest to our own internal inventions.
[Court File No. 32, exh. K]. Dr. Stratienko contends that this Cordis guideline suggests that review of his patent application extended to persons other than Mr. Scheessele and Mr. Coletti.
Dr. Stratienko's claims for Trade Secret Theft in violation of Term. Code Ann. § 47-25-1701 (Count Three), Common Law Misappropriation/ Conversion/ Wrongful Benefit (Count Two), and Breach of Contract (Count One) will be addressed in turn.
III. Analysis A. Tennessee's Uniform Trade Secrets Act
Dr. Stratienko asserts a claim alleging theft of a trade secret pursuant to Tennessee's Uniform Trade Secrets Act, TENN. CODE ANN. §§ 47-25-1701 through 47-25-1709. Regarding the effective date of the Uniform Trade Secrets Act, the Tennessee legislature provided in Section 11 of the Act:
[t]his act takes effect on July 1, 2000, the public welfare requiring it, and does not apply to misappropriation occurring prior to the effective date. With respect to a continuing misappropriation that began prior to the effective date, the act also does not apply to the continuing misappropriation that occurs after the effective date.
Public Acts, 2000, Ch. 647, § 11; see also TENN. CODE. Ann. § 47-25-1701 (compiler's notes); Eagle Vision, Inc. v. Odyssey Medical, Inc., No. W2001-101772-COA-R3-CV, 2002 WL 1925615, *3 n. 4 (Tenn.Ct.App. Aug, 14, 2002) (applying the effective date of this statute).
Cordis argues in its motion for summary judgment that the Uniform Trade Secrets Act does not apply in this case because any allegation of trade secret theft necessarily refers to events that began prior to July 1, 2000. In support of this argument, Cordis points to the FDA approval of the Vista Brite Tip IG Catheter on April 28, 2000. [Court File No. 32, exh. O]. Cordis also provides a spreadsheet reflecting the shipment of seventy-eight Vista Brite Tip IG Catheters as of May 29, 2000. [Court File No. 33, exh. 3].
The plaintiff argues that the Court should not consider any disclosure to the FDA as a disclosure in violation of the Uniform Trade Secrets Act, because Cordis requested that the FDA treat its application as confidential and thereby invoked the protection of 21 C.F.R. § 807.95(b). The plaintiff argues that the confidentiality provided by the FDA prevents the application from being considered a disclosure under Tennessee law. Dr. Stratienko suggests that the statute applies because the premarket notification was dated April 7, 2000, and argues that disclosure did not occur until after July 1, 2000, when the 90 days of FDA confidentiality had expired.
21 C.F.R. § 807.95(b) provides that when requested and with certain other restrictions, the FDA will not publicly disclose the existence of a premarket notification submission for 90 days for a device that is not already on the market.
The plaintiff does not cite any authority for the proposition that a unauthorized disclosure is not actionable where it is made under a promise of confidentially, even if that confidentially is provided by a government regulatory agency. Instead, the plaintiff relies only on dictionary definitions of the word disclosure, which similarly do not contain the conditions that the plaintiff wishes the Court to apply. [Court File No. 31 at 8].
The Tennessee Uniform Trade Secrets Act prohibits "misappropriation" of a trade secret and provides that misappropriation includes "disclosure or use of a trade secret of another without express or implied consent. . . ." TENN. CODE ANN. § 47-25-1702 (emphasis added). Cordis's application to the FDA describing the Vista Brite Tip IG Catheter is clearly a disclosure regardless of any confidentiality provided by the FDA regulations. However, even absent such disclosure, the use of the allegedly misappropriated trade secret, prior to the effective date of the act, is clear from evidence of shipment of the Vista Brite Tip IG Catheter prior to July 1, 2000. The shipment of 78 Vista Brite Tip IG Catheters by May 28, 2000, would alone demonstrate both use of the trade secret in the development of the product and use of the trade secret directly through providing the allegedly offending product to others. Because the allegedly offending Vista Brite Tip IG Catheter was both disclosed and used prior to the July 1, 2000 effective date for the Tennessee Uniform Trade Secrets Act, that statute does not apply in this case.
TENN. CODE ANN. §§ 47-25-1703 and 47-25-1704 provide, respectively, for injunctive relief and damages, thus demonstrating that the legislature did not only intend to prohibit use which resulted directly in financial gain by the offender.
B. Common Law Misappropriation / Conversion / Wrongful Benefit
i. Misappropriation
Tennessee recognizes a common law action for misappropriation of a trade secret. Hickory Specialities, Inc. v. B. L. Laboratories, Inc., 592 S.W.2d 583, 586 (Term. Ct. App. 1979). In order to prevail, "the plaintiff must establish four elements: 1. the existence of a trade secret; 2. communicated to the defendant while the defendant is in a position of trust and confidence; 3. use of that information by the defendant; and 4. resulting detriment to the plaintiff." Inter a Co., LTD. v. Dow Corning Corp., No. 92-6324, 1994 WL 69582, *3 (6th Cir. March 7, 1994) (citing Hickory Specialities, Inc., 592 S.W.2d at 586 (citing Smith v. Dravo Corp., 203 F.2d 369, 373 (7th Cir. 1953)).
At issue in this case is the third element, use of information by the defendant. Cordis presents the declarations of both William Scheessele, with whom Dr. Stratienko communicated, and Paul Coletti, an in-house attorney for Johnson Johnson, Cordis's parent company. [Court File Nos. 20 21]. Both declarations state that they were the only two people involved in the review of Dr. Stratienko's information and that they did not disclose the information to others. Cordis argues that in the absence of any direct evidence from the plaintiff rebutting the declarations, it is proper to award summary judgment due to the plaintiffs failure to meet an element of his claim. [Court File No. 22 at 10-12].
The plaintiff presents two arguments against reliance on the declarations of the defendant's employees. First, the plaintiff argues that the declarations may not be considered by the Court due to the Supreme Court's holding that "the court should give credence to the evidence favoring the nonmovant as well as that `evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that the evidence comes from disinterested witnesses . "`Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 151 (2000). The plaintiff suggests that, as employees of Cordis or its parent company, the declarants are interested witnesses.
The Reeves case occurred in the context of a motion under FED. R. Civ. P. § 50. Reeves, 530 U.S. 133. The plaintiff argues that Reeves applies here. In so doing, plaintiff relies on language in that decision explaining that "the standard for granting summary judgment `mirrors' the standard for judgment as a matter of law, such that `the inquiry under each is the same.'" Id. at 150 (citations omitted).
Cordis correctly notes that the interpretation of the Reeves decision suggested by the plaintiff has not been adopted by the Sixth Circuit. In a per curiam panel opinion, the Sixth Circuit was presented with a case in which the plaintiff argued that the court should not consider the testimony of the defendant's witnesses due to the holding in Reeves. Almond v. ABB Indus. Sys, Inc., No. 01-3382, 2003 WL173640 (6th Cir. Jan. 22, 2003). The court reasoned that "this interpretation of the summary judgment standard both over-reads Reeves and leads to absurd consequences." Id. at *2. Instead the court notes "[t]he testimony of an employee of the [movant] must be taken as true when it disclosed no lack of candor, the witness was not impeached, his credibility was not questioned, and the accuracy of his testimony was not controverted by the evidence, although if it were inaccurate it readily could have been shown to be so." Id. (citing 9A CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 2527 at 287 n. 9 (2d ed. 1995) (citations omitted)). For this reason, the Court declines to accept the plaintiffs interpretation of the Reeves case and will consider the declarations of the William Scheessele and Paul Coletti.
Second, the plaintiff argues that circumstantial evidence of use of a trade secret is sufficient to survive summary judgment, citing to Droger v. Welsh Sporting Goods Corp, 541 F.2d 790 (9th Cir. 1976) and Friedman v. QuestInt'IFragrances Co., No. 02-55177, 02-55672, 2003 WL1194193 (9th Cir. March 3, 2003). The Sixth Circuit, however, has taken a different approach to this issue. In an unreported opinion, the Sixth Circuit has directly addresses the question of whether circumstantial evidence is sufficient to avoid summary judgment in a Tennessee trade secret case where the defendant provides testimony of employees which negates the element of use. See American Relocation Network Int'l, Inc. v. Wal-Mart Stores, Inc., No. 96-5540, 1997 WL 415313, *2 (6th Cir. July 21, 1997). In American Relocation Network, the Sixth Circuit held that "because [the plaintiff] offers no concrete evidence to overcome the motion for summary judgment, the district court's decision should be affirmed." Id. at 3.
As in American Relocation Network, the plaintiff, Dr. Stratienko, offers no concrete evidence to controvert the declarations of William Scheessele and Paul Coletti nor to suggest that there was actual use of the information provided by Dr. Stratienko during the development and manufacture of the Vista Brite Tip IG Catheter. Both William Scheessele and Paul Coletti state in their declarations that they were the only two people to possess the information and, in addition to not disclosing it, they kept the information locked in their offices. [Court File Nos. 20 21].
Dr. Stratienko first attempts to counter the declarations of William Scheessele and Paul Coletti by suggesting that their statements, if true, conflict with Cordis policy. The policy regarding consideration of external inventions by Cordis appears in a May 25, 1999 Interoffice Memorandum that states as follows:
Reviews will be conducted by members of the New Business Development, New Product Strategy, Legal, and to a lesser degree, senior members of RD. It is our goal to minimize exposing our innovative engineering talent pool to external ideas, to safeguard our interest to our own internal inventions.
[Court File No. 32, exh. K]. As the declarations of William Scheessele and Paul Coletti each refer to their role as Associate Manager of New Business Development and Associate Patent Counsel, respectively, it does not appear that the policy was violated. [Court File No. 20 21]. Nor does this policy statement appear to be in conflict with the declarants' testimony, because the plain language of the policy does not require review by a member of each of the listed groups. The same memorandum instructs Cordis employees that "it will be the NBD's [(New Business Development)] responsibility to work with the appropriate people within Cordis to evaluate external concepts." [Court File No. 32, exh. K].
Next, Dr. Stratienko suggests Mr. Scheessele provided false reasons for not pursing his invention and therefore the Court cannot now rely on Mr. Scheessele's declaration regarding the movement of documents within Cordis. Dr. Stratienko's affidavit states that Mr. Scheessele orally advised him that "there was no room in the product development budget of Cordis to develop [his] . . . product" and "Cordis had no interest in [his] . . . invention." [Court File No. 32, exh. A].
"The general rule is that specific facts must be produced in order to put credibility in issue so as to precluded summary judgment." 10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2726, p. 444-445 (2d ed., rev. vol. 1998) (citations omitted)). In this case, the specific "facts" suggested by the plaintiff can be described as a diplomatic rejection of Dr. Stratienko's invention. The subsequent development of the Vista Brite Tip IG Catheter, by Cordis, does not make the statements attributed to Mr. Scheessele false, nor does it raise issues as to his credibility regarding the question of who had access to the documents submitted by Dr. Stratienko. Dr. Stratienko provides no similar argument attacking the credibility of the declaration of Paul Coletti.
Finally, Dr. Stratienko attempts to create a genuine issue of material fact with expert testimony. Dr. Stratienko provides two experts' declarations stating that the information provided to Cordis "teaches" the combination of the sheath and catheter in one product. [Court File No. 32, exh. M at 3, exh. N. at 8]. At issue regarding this element, however, is not whether Cordis could have gleaned information from Dr. Stratienko's disclosures for use in its own product, but rather if they did in fact use Dr. Stratienko's disclosures in such a manner. The experts' declarations therefore do not address the element of use. Notably, a letter from the FDA to Cordis states that the product later called the Vista Brite Tip IG Catheter is "substantially equivalent . . . to legally marketed predicate devices . . ." which suggests that Dr. Stratienko's device is not so revolutionary as to necessarily create the inference that the Vista Brite Tip IG Catheter could only have been developed through use of Dr. Stratienko's disclosures. [Court File No. 32, exh. O].
The plaintiff provides no evidence of actual use of the information, or even access to the information, by those responsible for developing the Vista Brite Tip IG Catheter. The plaintiff has therefore failed to produce evidence supporting an essential element of a trade secret misappropriation claim. This claim therefore fails,
ii. Conversion
The plaintiff asserts a common law claim for conversion of trade secrets. As recently as 1995, the Tennessee Court of Appeals refused to recognize a cause of action for conversion of intangible property. BL Corp. v. Thomas Thorngren, Inc., 917 S.W.2d 674, 680 (Term. Ct. App. 1995). The court explained that "[c]onversion is the appropriation of a chattel, i.e. tangible property." Id. (citing Black's Law Dictionary, 402 (4th ed. 1941)). The Sixth Circuit has applied this principle and refused to extend the Tennessee tort of conversion in a case claiming conversion of a trade secret, reasoning that a trade secret is intangible property. Intera Co., LTD. v. Dow Corning Corp., No. 92-324, 1994 WL 69582, *4 (6th Cir. March 7, 1994).
The plaintiff cites to no Tennessee law in support of his contention that the tort of conversion would apply to intangible property such as a trade secret. The cases from other jurisdictions cited by the plaintiff precede the decision of the Tennessee Court of Appeals, and were available to the Tennessee Court of Appeals at the time it reached its decision. [Court File No. 31, at 21]; see B L Corp., 917 S.W.2d at 680. Although, the plaintiff argues that the Tennessee Supreme Court would not limit the tort of conversion to tangible property in the manner suggested by the Tennessee Court of Appeals, the Sixth Circuit has previously declined to reach that conclusion. Intera Co., LTD., 1994 WL 69582 at *4.
Similarly, this Court is not persuaded by the plaintiffs contention that in this case the intangible asset, the trade secret, was contained in documents and, therefore, is not analogous to other intangibles, such as the good will of a company. The Sixth Circuit has considered the question of the application of conversion under Tennessee law to trade secrets and did not reach the conclusion suggested by the plaintiff. Id. Furthermore, the rational suggested by the plaintiff fails. Although the intangible trade secret may have been documented, it is not the documents which the plaintiff contends have been converted. Given Tennessee's statutory and common law claims for trade secret misappropriation, such expansion of the tort of conversion seems unnecessary. This Court declines to expand the common law tort of conversion beyond the limitations set forth by the Tennessee Court of Appeals. iii. Wrongful Benefit
The plaintiff asserts a claim for "wrongful benefit." "Tennessee has long recognized claims based on the doctrine of unjust enrichment," to which the Court presumes the plaintiff is referring. Mill Creek Associates, Inc. v. Jackson Found., Inc., No. M2001-02811-COA-R3-CV, 2003 WL 1018136, *4 (Tenn.Ct.App. March 11, 2003). Dr. Stratienko alleges that Cordis was unjustly enriched through the use of Dr. Stratienko's invention. As discussed above, the plaintiffs claim for misappropriation does not survive the defendant's motion for summaryjudgment. Absent a showing of use of the invention by the defendant, the plaintiffs claim for "wrongful benefit" must also be dismissed.
C. Breach of Contract
Finally, Dr. Stratienko asserts a claims of breach of contract based on the Nondisclosure Agreement signed by himself and a representative of Cordis. The contract provides that Dr. Stratienko's information will not be used for any purpose other than an evaluation of Cordis's interest in licensing the invention. [Court File No. 32, exh. I]. The plaintiff has failed to present any evidence contradicting the defendant's witnesses' declarations that the information was not accessible to any persons other than William Scheessele and Paul Coletti. The claim for breach of contract will therefore be dismissed.
IV. Conclusion
For the reasons stated above, Cordis's motion for summary judgment will be GRANTED. The plaintiffs claims for Breach of Contract (Count One), Common Law Misappropriation/ Conversion/ Wrongful Benefit (Count Two), and Trade Secret Theft in violation of the Uniform Trade Secrets Act (Count Three) will be DISMISSED WITH PREJUDICE.
The plaintiffs claim for inducement of patent infringement remains before the Court for adjudication. An order will enter.
ORDER
For the reasons stated in the accompanying memorandum, Cordis's motion for summary judgment is GRANTED. The plaintiffs claims for Breach of Contract (Count One), Common Law Misappropriation/ Conversion/ Wrongful Benefit (Count Two), and Trade Secret Theft in violation of Tenn. Code Ann. §§ 47-25-1701 through 47-25-1709 (Count Three) are DISMISSED WITH PREJUDICE.
The plaintiffs claim for inducement of patent infringement (Count Four) remains before the Court for adjudication.
SO ORDERED.