ANGIOSCORE, INC., Plaintiff,
v.
TRIREME MEDICAL, INC., ET AL., Defendants.
Case No. 12-cv-03393-YGR
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
July 1, 2015
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case staged a tension between the inveterate, established law of fiduciary duties held by corporate directors and breach of fiduciary duty claims that arise when directors of emerging companies are innovators in the technology themselves. In such an instance, plaintiff AngioScore would have innovation subverted to duty; defendants would have duty subverted to innovation. Neither party's position admits of any balance, and neither can be wholly right. As set forth in this Order, the Court finds that where transparency, loyalty, and good faith predominate, a director's fiduciary duties and his drive to innovate can co-exist, albeit with the duties to the corporation taking precedence.
AngioScore brings state law claims for breach of fiduciary duty against one of its founders and former directors, Eitan Konstantino, alleging that while he was a member of AngioScore's board, Konstantino developed a medical device directly competitive with AngioScore's flagship product. Rather than offer the opportunity to acquire the new device to AngioScore, AngioScore maintains that Konstantino instead took it for himself. AngioScore also claims that corporate defendants Quattro Vascular PTE Ltd. and TriReme Medical, Inc. aided and abetted Konstantino's
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breach, and that liability for these entities' wrongdoing runs to QT Vascular Ltd. Defendants disagree, arguing in part that the duty was not breached either because no opportunity existed, or because AngioScore was not entitled to Konstantino's intellectual property as a matter of law.
Following a six-day bench trial on AngioScore's claims, the parties submitted proposed findings of fact and conclusions of law. (Dkt. Nos. 643 (AngioScore's Opening Post-Trial Brief ("AOB"), 645 (Defendants' Opening Post-Trial Brief ("DOB"), 649 (AngioScore's Post-Trial Reply Brief ("ARB"), 650 (Defendants' Post-Trial Reply Brief ("DRB")).) Specifically, those claims pertain to Konstantino's breach of fiduciary duty; that Quattro and TriReme aided and abetted the same; QT Vascular is a successor in interest to Quattro and TriReme and therefore liable for their aiding and abetting; and finally, that defendants have violated California's Unfair Competition Law. Having reviewed the evidence of record, the arguments of the parties, and relevant case law, for the reasons set forth in these findings of facts and conclusions of law, the Court hereby FINDS for AngioScore in all material respects and AWARDS a remedy accordingly.
I. The Parties
Since its founding in 2003, AngioScore has designed, manufactured, and marketed specialty angioplasty balloon catheters that are used for the treatment of cardiovascular disease. Its signature product line, sold under the brand name AngioSculpt, consists of an nylon balloon surrounded by a nitinol structure. The AngioSculpt is sold in an array of dimensions and lengths to meet varying patient needs, although the structure of the balloon and cage remain unchanged in all material respects at each available sizing option. The purpose of the AngioSculpt is to treat cardiovascular disease, whereby plaque deposits along a blood vessel's wall, forming what are called lesions. The plaque deposits harden and block, or occlude, blood flow, with potentially severe health risks. The AngioSculpt is used to open occluded or narrowed blood vessels at lesion sites by inflating the balloon to compress the plaque deposits against a vessel wall. As the balloon
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inflates, the AngioSculpt's nitinol wire cage expands. The expanded cage sits atop the balloon and impresses upon plaque, "scoring it," in an effort designed to "crack" the plaque and open the blood vessel, without injuring or puncturing the vessel wall. It is to this scoring feature that AngioScore owes its name. After use, the device can then deflate, returning to its original form, for removal from the patient's body.
Defendant Eitan Konstantino invented the AngioSculpt. An engineer by training with a doctorate in laser surface treatment, optical design, and materials science, Konstantino was a co-founder, President, and Chief Scientist of AngioScore, Inc. In this role, Konstantino sought to develop and bring the AngioSculpt to market, which involved gaining approval both in Europe and through the United States Food and Drug Administration ("FDA"). To accomplish these goals, Konstantino sought funding from investors, who in turn acquired seats on AngioScore's board of directors. Among those directors were Tom Raffin, a partner with the venture capital firm Telegraph Hill Partners, and Lisa Suennen, a partner at Psilos, another such firm.
In 2005, the board decided that Konstantino would be better suited to a role directed to research and development. Tom Trotter then became AngioScore's chief executive officer. When Trotter assumed the position, he and Konstantino discussed what role was most appropriate for Konstantino moving forward. In light of that conversation, Trotter offered Konstantino the role of Executive Vice President of Research and Development and Chief Scientific Officer.
AngioScore wanted Konstantino to remain on the AngioScore team because of his central role at the company as a co-founder, and his skill as an engineer. Konstantino, however, expressed a desire to leave and work full time as President and CEO of TriReme Medical, Inc., a company he had founded for the purpose of developing bifurcation stents. Accordingly, in the fall of 2005, Trotter started to look for a replacement for Konstantino. Both he and Konstantino interviewed the candidates. At the same time, Konstantino requested that he be given permission to work on a developing technology with TriReme: endovascular bifurcation stents and delivery systems for the same. Although bifurcation stents are not competitive with specialty balloon angioplasty catheters, AngioScore's board took this request seriously, ultimately adopting a
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resolution that granted Konstantino permission to pursue this limited goal, and waived AngioScore's interest in the bifurcation stent technology.
In late 2006, the role of AngioScore's Vice President of Research and Development transitioned from Konstantino to Feridun Ozdil. While the details remain unclear, the relationship between Konstantino and Ozdil soon became strained and culminated in a physical altercation. Both Konstantino and Ozdil are intelligent scientists, but both are egotistical and authoritarian. The "he said"/"he said" personality conflict was never resolved definitively.
In April 2007, Konstantino's employment with AngioScore terminated, although he remained on its Board of Directors. In his capacity as a board member, he continued to attend AngioScore's board meetings and received updates about AngioScore's financial well-being and the status of its new product development up until he was asked to resign in February 2010.
II. Chocolate, the Device at Issue
In the fall of 2009, Konstantino and his brother-like friend and colleague, Tanhum Feld, conceived of what was to become "Chocolate" during a telephone "brainstorming" session. Feld was discussing frame ideas for a balloon; Konstantino offered the notion of a balloon surface defined by pillows and grooves. The concept was that a nitinol cage would surround a nylon balloon. As the balloon inflated, it would protrude through the cage. The inflated balloon would then display a pattern of pillows and grooves, exerting force against plaque lining a vessel wall.
With the concept for Chocolate established, Feld undertook to engineer the device, directing and coordinating efforts of TriReme employees with Konstantino's approval. By October 2009, Konstantino applied for a provisional patent application, naming himself and Feld as co-inventors. Within just a few months, Chocolate had progressed from an intellectual concept to physical prototypes. In January 2010, Konstantino and other TriReme employees attended animal testing at Stanford for a Chocolate prototype.
Along with supervising and directing the employees at TriReme in their efforts to develop Chocolate, Konstantino assumed the role of the businessman, conceptualizing the marketing of Chocolate and pitching it to investors under the guise of a corporate entity called "Proteus." During the second half of 2009, Konstantino met with twenty to thirty investors, offering them the
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opportunity to invest in Chocolate. In these pitches, Konstantino represented that the Chocolate was being developed by "Proteus," and that Chocolate's intellectual property, design, prototypes, business model, team, and partnerships were all completed. With representations of this sort, he secured a grant from the Singapore Economic Development Board and continued to solicit additional investors.
The similarities between AngioSculpt and Chocolate are obvious. Both are specialty angioplasty balloon catheters. Both are comprised of a nylon balloon surrounded by a nitinol structure. Both are used to treat peripheral and coronary artery disease by...
