honor may it please the court my name is gary shipman i represent the plaintiff appellant in this litigation between purely private parties dismissal of the plaintiff claims based upon it june two thousand and nine claims involving negligent misrepresentation and reports by sri were improper the relevant standard here is the standard for the conduct a research community not i see this is not a case about limited funding this is a case about limited knowledge it is without dispute that the scientist assigned by sri to this matter did not know that the gold standard for the conduct of the in vitro very logical asses testing the very mechanism of action that was that issues in this case with p p m c it is without dispute that sri and made assumptions that these assaye would operate the same across to sell off and it is likewise without dispute that there is absolutely positively no factual or scientific support for that assumption this without dispute that  no efforts were made to do any research by the scientists that was worse on to this project to support that assumption there's no dispute that when the decision was made by whoever it was made to change cell lines that no warnings were given by sri the expert that a change in cell lines would lead to what in fact happened here so let me back let me start from sort of a fundamental place for me what what is this is a negligent measure of isn't ation claim at least with respect to the sort of false negative and i'll sort of i think we're sort of talking about the same thing there what is the c s they would have been performed and those negatives would not have been negatives they would have been positive and that misrepresentation that you're alleging this is the june two thousand and nine report right now with the first misrepresentation followed by and that's absurd but that's the relevant i want to focus on the false negatives part first that's the june two thousand and nine report yes right the challenge that i've got and not i'm looking it forty five seventy seven of the joint appendix but that's the june two thousand and report and it didn't say anywhere in there that there were negatives right what it says instead said these are the ones that were hit quote in c e eisley the test that was done and it says with respect to the examples that you've got right which is one fifty four and one fifty six it goes through its own this table in c m s cells not the gold standard but the standard that they represented to you they were using it says they didn't hit their yes or right so what i can't understand is how that is it all a misrepresentation to you because it tells you exactly what they did and if if you thought c m s was a bad idea right or you thought that you wanted something other than c m s but you certainly had the ability did to ask for that because eight they told you exactly what they did and there's no misrepresentation that if you did a different test you got to come up with a different result first we did not have control of this asset it was done pursuant to a contract with and i am a and sri b it is sri that had exclusive control over the means and the methods it was sri that was supposed to use state of the art techniques in undertaking this there are logical acidy to test this particular mechanism of action they were required to have sufficiently qualified and trained personnel and you and you may well not here but you might well have a contract claim that they didn't live up to their contract would i asking you about is a negligen misrepresentation calling what you're saying is they misrepresented what they were telling you but they say it in big bold letters i mean that the top of the page right compounds against a job the one in c c e m dash s s right they tell you exactly how can that might make you get a contract claim that's what we can talk about that in a minute what i want to know is how is that a misrepresentation to you because of their representations that they want undertaking and had performed those acid person went to the obligation to use state of the art techniques in testing this unique mechanism of action in vitro when they tell you that one fifty four one fifty six do not hit against the c m s that's not misrepresenting that they would have hit against the p b m c they're telling you exactly factually accurate that one fifty four one fifty six do not hit against c m s yes or but it is a scientifically irrelevant finding given what they were charged with doing second again there are two contracts here and there is one contract between asked our audit and trauma for sri to use its drug discovery technology and then there is the separate contract from where the tort duty flows between sri and i am id to perform in vitro dear a logical ass it is so there was no contract for the performance so then the true very logical asses judge richardson but tween sri and shawn the contract which did not allocate risk of loss that does not contain and is not a good information is not a good it does not allocate loss between these parties in the contract for sri to utilize we do not have no no sir try to never have a contralto we go sri had a contract with the government hard that is where the duty to perform that contract not negligently flows to trauma in the performance of that contract between sri and i a id using our technology that is where the tort duty arises from there is no contract claim here and the only reason that the debate exist about whether it is a contract calling or whether it is a tour calling is because of the playing to his claims of negligent misrepresentation that's the only reason why the debate arises it is clear that the fact that there is a contract in which according to sri according to allegations of the just told me that you agree it's not a misrepresentation notion i did not say that us said that the statement that they may that the what did not test positive in in c e m's was a true but scientifically irrelevant statement given the obligation that was imposed upon sri to use state of the art techniques to test this mechanism of action and where does that obligation come from what's the source of that obligation the contract between sri and you're not a part of that contract that is you can't enforce the contract right yes we're not trying to enforce that contract we're trying to enforce the duties of the contract no sir we're trying to enforce a promise to perform the contract in a manner that does not injure truong that is the nature of negligent misrepresentation cli steelcase that is section five fifty two of the restating that makes it abundantly clear bet our status these of the the contract with and i id does not preclude in tor because the courts have looked at the policy reasons behind that judge richardson to encourage that party flight sri perform their obligation and  claim is a misrepresentation where is that statement that you're a lying upon negligent misrepresentation claim the references in the report the published record the june two thousand and nine recor reference the n a the contract under which that ass they will perform whose provisions require that in performing testing this particular mechanism of action that they use state of the art techniques and they have sufficiently qualified personnel and they didn't they didn't have sufficiently qualified personnel they did not use state of the art techniques and there is no substantial dispute in the record about that at all so is are those expressed words in the report but of the contract that is a matter of public record that contains those provisions all are and there is no dispute no contention has been would who estimated the probability of your client securing a licensing deal that once they go through the due diligence stage and i get that but the problem i have i think with that analysis is that apparently the expert did not account for the fact that these compounds had in fact been tested by other licensees at the beginning of this process and yielded has a record shows unimpressive results and so how can it be then that you've shown a reasonable certainty of damages with respect to what value the intellectual property the compounds that they have acquired he ended changed in his testimony that at the point in time when the false negatives were discovered and even there after when they were discovered they had gotten past the initial gate keeping function for instance when they the false negatives were discovered in two thousand and twelve dr at the head of his own c r a thought those false negatives were of sufficient ethic to see where a he invested his c r oath additional money in performing analog stud closed that had these false negatives been reported out of positives in two thousand and nine there was a market there were some funding for this novel mechanism of action that did not exist  abstract but then you've got this evidence that suggests that with respect to these compounds they weren't doing all that well they hadn't been tested they've been tested and they had yielded unimpressive results so isn't the expert supposed to account for that and he testified is that he did they he accounts for the fact that there may not be success that in order for these compounds to have value and as importantly understand there were two components of value value of our drug discovery technology that indeed it would do what we advocated it would do but then be about the compounds he indicated that all of these have lies to have your thank you for having me your honor may it please the court my name is jay lester and i represent the apple e in this case southern research institute i'm going to start with the three questions asked by this panel the first question asked by mr  di as was did mr reed's account for the fact that these good either way he is my apologies and on page you were the first one to do that on page six thousand five hundred eighty four of the mr expressly admits that he did not take into account the fact that there was substantial evidence in the record that these compounds exhibited week if any antiviral activity and that is absolutely important to train this claim under the false negative theory if they cannot show non spatial with damages they cannot state a claim going to judge richardson's point about was there a misrepresentation judge rich then you hit the nail on the head there is no misrepresentation at issue here all southern represented was that it had performed c e m s s s a's that's all that was in the june two thousand and nine data or it is undisputed that southern properly performed those assays so there is no negligent misrepresentation whatsoever now tran us trying to counsel says that well they may not have performed state of the art assays that comes  from that and i contract southern was not sued in contract they were sued for negligent misrepresentation even if you take trana statements that southern negligently performed the research that's not a claim for negligent misrepresentation that would be a claim for negligence and that goes to your question judge king which is has any issue been appealed from judge fox decision judge fox dismissed all negligent claims as a matter of all under the statute of limitations for that very reason which is not being appealed here today there cannot be a claim for negligence it has to be a misrepresentation and the only representation that southern made in the june two thousand and nine  er or was it would run c e m s s s a's and in fact if you even look at the future direction section of the june two thousand and nine data report which is it page one thousand five hundred sixty six of the join gold standard assets on the hits from c m s s s a's and that's exactly what southern did in the vendor of two thousand and ten southern rand p v m c s a's the gold standard assays on three hits from the june two thousand and nine data report therefore you don't have to get to dr wayne burke you don't have to get to justify the reliance you don't have to get to the oil or years sleep all you have to find is that there is no misrepresentation in this case and the undisputed facts establish that but this court could just as easily affirm on the lack of evidence of damages dr chanology who's a world renowned expert in a child he found that hits number one fifty four and one fifty six exhibited no antiviral activity at all in p p m c s a's the gold standard assays what tranter would lead you to believe is that a pharmaceutical company after two thousand and twelve would make the exact opposite decision that it made after two thousand and twelve that it made that it would make the exact opposite decision before two thousand and twelve and that is spend millions of dollars on compounds that do not exhibit anti viral activity in the quote unquote gold standard assay that is the type of speculation that cannot survive a motion for summary judgment talk to me if they can about the falls positives because that there does seem to be a misrepresentation there when you talk about forty six and one eighty two there's a statement that the a's or hiss and i think we all acknowledge now that they were not hits right so that is a misrepresentation right yes we're not going to screw up and so what i will ask you about there is really this is maybe more for your colleagues but i'll ask you as well what was there evidence in the november of two thousand and ten southern research performed p b m c s a's on his number forty six and his number one eighty two and found that they did not exhibit antiviral activity in those compounds and so it is our position that any patents that were filed after november of two thousand and ten you could not reasonably rely on that c e m s s that of which tran it concedes is inferior to the p b m c data which found that the compounds were inactive and that's why that that matters states and in december of two thousand and ten these compounds so that's the false positive compounds do not have potential for further development rather given the c m s s that a the compounds will only service possible produce to identify other compounds that may have better safin specificity and greater therapeutic indices this statement cannot support trying to claim that it was induced to rely upon the p data to fall patents on those to false positive compounds when both in november and december they were told this compounds are not worth further development and just include you your view is the record does not reveal evidence that there were any patent applications filed prior to this december seventeenth e mail there were patent applications that were filed before the end trainers in iraq or tories they provide a list of the hands that were filed and there are some that predate those what about on forty six and one eighty two we don't know that's not in the record so there's no record of that they filed in forty six and one eighty two prior to december of two thousand and ten after which they could not possibly have relied on the statement the only record evidence that patents were filed on those two compounds comes from the declaration of mr edward gallagher which the district courts struck and that's not appealed for this court today but even putting aside that even if we look at that that also didn't give us the answer of the weather forty six and one eighty two when they were filed or rightly if they were file it actually does state that patents were followed on those two compounds that it does not give a date you're correct about that last point here when we're talking about the false positives what is the evidence in the record that patent applications were filed on forty six and one eighty two prior to december the seventeenth of two thousand and ten the deposition testimony that they were filed after the november two thousand and ten report the subsequent say that again sure the deposition testimony of the same individual that provided the affidavit that in reliance upon the november two thousand and ten report and the press releases that sri coauthored with trauma thereafter the subsequent assurances after december two thousand  that they could rely upon the results that were contained in the november two thousand and ten report that what you would i just want to make sure i'm clear you agree there were no pattern applications filed on forty six and one eighty two prior to the november two thousand and ten report i cannot state judge saying they were filed after the november two thousand and ten report whether they were filed in november december or january they were filed after that report and go to press record support for that fact the deposition testimony of the individual whose affidavit was stricken containing only the precise dollar  that he testified to approximately that they had expended to get those worthless patents now the exact date it may be that those patents are actually your honor in the record and so when he's asked the question about whether the timeframe in which they were filed he said somewhere between two thousand and ten and two thousand and twelve yes or just he did that when you referred to that's providing the answer of when they were file after write the november two thousand and ten report we didn't even say that actually just as two thousand and ten well the context is they were they were talking about that two thousand and ten report when those questions were asked because that's the topic of conversation on this pat so you agree it's at least after the november two thousand and ten report yes and some time before the end of two thousand and twelve but there's no other evidence on the record as to when they were file  of then the as i say prepared to say that patterns and cells may be on the record i can't say for sure but the answer is no sir but it is important to emphasize judge richardson that the repeated assurances to the press releases that were co authored by sri that hailed these compounds as quote potentially drug bill were those in the record the press releases are in the record and those are after november yes absolutely and i refer kids forty six and one hundred two they don't refer to them by a number of that but they refer to them by the number of hits that were deemed to be potentially drug will as a result of those fraudulent we now know june two thousand and they're not referencing forty six and one hundred two individuals is what you're telling us well the report does the report itself does the press releases simply refer to two compounds they don't refer to numbers but those were the only two compounds in the june two thousand  report that were ever referred to this quote unquote potentially drug now a point though i want to to make ad nauseum if i need to but obviously i don't have a minute the fact that we have a third party duty to use reasonable care in performing that wasn't the negligence claim dismissal and statue limitations grounds that the note what the negligent misrepresentation claim was not because we get the discovery rule when somebody getting back to judge were to this question there was no negligent misrepresentation claim if in fact the reports indicated that they were performing the bird tests they said they were going to perform but in understand that it wasn't just the report it was conduct prior to the report in making the changes would be clear that you're still talking about a negligent misrepresentation not negligence when you're saying get it but but but but given that a breach of duty is a part of methods that were used that were not designed it couldn't have been scientifically designed to test of the very thing that the june two thousand and nine report says that they tested the mechanism of action everyone agree you would not use anything other than p b m c so the idea that after we get positives false positives from the c e ins we then test in p p and c s as the experts say are absolutely not they're not that's the reason why we license our drug discovery technology to the popcorn expert did not know had ability had no funding to go test these compounds our