Glycobiosciences, Inc. v. Woodfield Pharm., LLC

GLYCOBIOSCIENCES, INC., Plaintiff, v. WOODFIELD PHARMACEUTICAL, LLC, Defendant.

CIVIL ACTION NO. 4:15-CV-02109

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

ENTERED: April 28, 2016

April 27, 2016

OPINION & ORDER

Pending before the Court in the above-referenced case is Plaintiff's Corrected Motion to Compel Return of Trade Secret Materials and for a Seizure Order, a Temporary Restraining Order and a Preliminary Injunction.¹ Doc. 22.

On March 31, 2016 this motion was referred in error to Magistrate Judge Frances H. Stacy (Doc. 66). The Court hereby strikes that referral.

The Court heard oral argument on the motion on December 15, 2015. Doc. 26. After considering the motion, response, oral arguments, and applicable law, this Court finds that (i) the motion to compel and for seizure order should be granted, (ii) the motion for a preliminary injunction should be granted, and (iii) the motion for a temporary restraining order should be denied as moot.

I. BACKGROUND

Plaintiff Glycobiosciences, Inc. ("Glyco") is the developer of numerous pain-relief products used in the treatment of damaged skin, wounds, ulcers, sores, and pain management, aswell as several other diseases and conditions. Doc. 22-1 at 5. These products utilize Glyco's proprietary and patented Ionic Polymer Matrix ("IPM") delivery system, which is made using hyaluronic acid ("HA"). Id. Glyco's HA delivery system is classified as a medical device by the United States Food and Drug Administration ("FDA") and the company holds patents protecting this technology. Id. The company also has a proprietary method for manufacturing its products. Id. Because Glyco is not engaged in manufacturing itself, however, it actively contracts with various manufacturers and distributors in order to produce and market its products. Id. at 6. In order to prevent unprotected dissemination of its trade-secret materials by such partners, Glyco requires that all such entities be bound by certain confidentiality and non-disclosure agreements. Id.

In February 2011, Glyco entered into a confidentiality agreement with two such entities, Great Southern Labs ("GSL") and ECR Pharmaceuticals Company. Doc. 22 at 4. In December 2011, Glyco and GSL also entered into a mutual nondisclosure agreement. Id. Seven months later, Pernix Manufacturing, LLC ("Pernix") acquired all of the assets of GSL—including the contractual rights embodied in the confidentiality and nondisclosure agreements between Glyco and GSL. Id. Sometime between 2012 and 2013, Pernix also acquired another entity known as Cypress Pharmaceuticals ("Cypress"). Id. On May 7, 2013, Glyco and the recently enlarged Pernix entered into a new nondisclosure agreement. Doc. 22-1 at 6. Within twelve months, however, Pernix was acquired by Defendant, Woodfield Pharmaceuticals, LLC ("Woodfield"). Id.

After this acquisition, Plaintiff and Defendant entered into the Manufacturing and Supply Agreement ("MSA") at the crux of this dispute. Id. Dated April 23, 2014, the MSA states that Woodfield is in possession of Glyco's proprietary HA formulation by virtue of its acquisition ofPernix. Id. The terms of the MSA further acknowledge Glyco's ownership of the information, state that Woodfield received the information under strict terms of non-disclosure and limited use, obligate Woodfield to return the materials to Glyco in the event the MSA's termination, and authorize injunctive relief for breach of the terms of the MSA. Id. at 5-6. Although Woodfield never actually manufactured anything for Glyco pursuant to the MSA, Doc. 28 at 3, the parties dispute whether Woodfield has used the proprietary information it gained through the MSA and other agreements to manufacture products similar to Glyco's product. Compare Doc. 22 at 7-9, with Doc. 28 at 3-4.

In a separate business transaction, on September 19, 2014, Plaintiff and Defendant's affiliate, Woodfield Distribution,² entered into a Third-Party Logistics ("3PL") Services Agreement to provide certain services to Glyco, including "inventory management, warehouse, storage, fulfillment, order processing, quarantine functions, distribution, handling and shipment of non-scheduled pharmaceutical products." Doc. 23-1 at ¶ 8. Pursuant to this agreement, Woodfield Distribution purchased and received two batches of Glyco's product from the company's then-manufacturer, Bioglan. Id. at ¶ 28. According to Woodfield Distribution, Glyco subsequently failed and refused to pay a number of invoices associated with the purchase and storage of this product. Id. at ¶¶ 30-53. As that contract dispute between Plaintiff, Defendant's affiliate, and two other companies unfolded, relations between Plaintiff and Defendant deteriorated.³ Doc. 28 at 1-4; see also Doc. 28, Exs. H-L. By June 3, 2015 all agreements between Plaintiff and Defendant had been terminated. Doc. 22 at 8. Under the terms of the MSAand the other confidentiality and nondisclosure agreements that Plaintiff and Defendant's predecessors were party to (wherein the confidentiality clauses were stated to survive the expiration or termination of the agreements), Glyco subsequently requested the return of its confidential information. Id. When Woodfield declined to return or confirm destruction of Glyco's confidential information under the terms of those agreements, this litigation ensued. Id.

In July, Glyco filed suit against Woodfield seeking specific performance, damages, and injunctive relief for breach of contract and tortious interference. Doc. 1 at 1; ¶ 27-69. In October, Glyco filed its first Motion to Compel Return of Trade Secret Materials and for a Seizure Order, a Temporary Restraining Order and a Preliminary Injunction. Doc. 15. Defendant responded in opposition. Doc. 19. That motion was superseded and mooted by the filing of the current Corrected Motion to Compel Return of Trade Secret Materials and for a Seizure Order, a Temporary Restraining Order and a Preliminary Injunction. Doc. 22. Defendant also opposes the current motion. Doc. 28.

On November 6, 2015, Defendant's affiliate, Woodfield Distribution, assigned its claims against Plaintiff to Defendant. Doc. 32-8. At the oral hearing on the pending motion, the Court granted Plaintiff's Motion for Leave to Amend Pleadings and Add New Parties, Doc. 30, as well as Defendant's Motion for Leave to File Amended Answer and Counterclaim, Doc. 23. Accordingly, Defendant now has pending counterclaims against Plaintiff for breach of contract, unjust enrichment, quantum meruit, and expenses of litigation and attorneys' fees based on the 3PL Services Agreement between Glyco and Woodfield Distribution. Doc. 23-1 at ¶¶ 4-8, 56-73.

II. LEGAL STANDARD

A party seeking a preliminary injunction must establish the following elements: (1) asubstantial likelihood that the party will prevail on the merits; (2) a substantial threat that irreparable harm will result if the injunction is not granted; (3) the threatened injury outweighs the threatened harm to the nonmovants; and (4) granting the preliminary injunction will not disserve the public interest. A.T.N. Indus., Inc. v. Gross, No. 15-20102, 2015 WL 8105841, at *3 (5th Cir. Dec. 7, 2015); Karaha Bodas Co. v. Negara, 335 F.3d 357, 363 (5th Cir. 2003). Although an injunction is an equitable remedy, see, e.g., Weinberger v. Romero-Barcelo, 456 U.S. 305, 311 (1982) ("It goes without saying that an injunction is an equitable remedy."), this circuit has repeatedly cautioned that a preliminary injunction is an extraordinary remedy that should not be granted unless the party seeking it has "clearly carried the burden of persuasion" on all four elements. Lake Charles Diesel, Inc. v. General Motors Corp., 328 F.3d 192, 195-96 (5th Cir. 2003) (quoting Mississippi Power & Light Co. v. United Gas Pipeline Co., 760 F.2d 618, 621 (5th Cir. 1985)) (internal quotation marks omitted). Nevertheless, a movant "is not required to prove its case in full at a preliminary injunction hearing." Fed. Sav. & Loan Ins. Corp. v. Dixon, 835 F.2d 554, 558 (5th Cir. 1987) (quoting University of Texas v. Comenisch, 451 U.S. 390, 395 (1981)) (internal quotation marks omitted). The decision whether to grant a preliminary injunction thus lies within the sound discretion of the district court. Weinberger, 456 U.S. at 320; Lakedreams v. Taylor, 932 F.2d 1103, 1107 (5th Cir. 1991).

III. ANALYSIS

A. Motion to Strike

As an initial matter, the Court addresses Defendant's request that the Court strike Plaintiff's Exhibit 4, Doc. 22-5, from the record and decline to consider it. Defendant argues that the exhibit is inappropriate for consideration for two reasons: (1) it is not authenticated, and (2)is hearsay.⁴ Doc. 28 at 4. Regardless of whether the Court were to find the document admissible, it would not change the Court's holding. As such, the Court declines to address Defendant's objections. See, e.g., Hanold v. Raytheon Co., 662 F. Supp. 2d 793, 801 (S.D. Tex. 2009) (finding it unnecessary to address evidentiary objections when, even if admissible, consideration of the evidence would not change the Court's holding).

B. Texas Choice-of-Law Analysis

Neither party directs the Court to a choice-of-law provision within the contracts cited, nor could the Court find one within the contract excerpts provided in the parties' exhibits. Because both parties cite Texas cases in their discussion of trade-secret misappropriation, however, the Court will also apply Texas law. See Garwood v. Int'l Paper Co., 666 F.2d 217, 221 n.6 (Former 5th Cir. Unit B 1982) (stating that when parties fail to direct the Court to applicable choice of law in diversity case, the court will assume that the substantive law the parties argued in briefing is the applicable law) (collecting cases).

Moreover, the Court notes that the decision to apply Texas law would likewise be supported even if the parties failed to address choice of law within their agreements. In diversity cases, district courts apply the...