Opinion ID: 203621
Heading Depth: 2
Heading Rank: 1

Heading: Unjust Enrichment Liability

Text: With these standards in mind, we examine the jury verdict in favor of MEEI, beginning with unjust enrichment liability. In Massachusetts, a claim for unjust enrichment does not require consideration, but there must be unjust enrichment of one party and unjust detriment to another party. MEEI-II, 412 F.3d at 234 n. 7 (internal quotation marks and citations omitted); see also 26 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 68:5 (4th ed.1993) (establishing that unjust enrichment requires: (1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) acceptance or retention by the defendant of the benefit under the circumstances would be inequitable without payment for its value); Stevens v. Thacker, 550 F.Supp.2d 161, 165 (D.Mass. 2008). Massachusetts courts emphasize the primacy of equitable concerns in a finding of unjust enrichment or quasi-contract: [C]onsidertions of equity and morality play a large part in constructing a quasi contract. Salamon v. Terra, 394 Mass. 857, 477 N.E.2d 1029, 1031 (Mass. 1985). Furthermore, Massachusetts courts have recognized that misuse of confidential information may lead to unjust enrichment. Under Massachusetts law, a constructive trust is ... imposed to avoid unjust enrichment of one party at the expense of the other where information confidentially given or acquired was used to the advantage of the recipient at the expense of the one who disclosed the information. MEEI-II, 412 F.3d at 238 (internal quotations and citations omitted). In short, we previously have found that in order for MEEI to show unjust enrichment based on unauthorized disclosure of confidential information, MEEI had to prove that QLT used MEEI's confidential information at MEEI's expense. Id. Against this backdrop, QLT argues that it was entitled to judgment because MEEI failed to produce proof of a legally cognizable benefit under either of its theories of unjust enrichment. QLT contends that neither its disclosure of MEEI's confidential information, nor MEEI's cooperation on the '591 application were compensable benefits as a matter of law. Consequently, QLT argues that it has not been unjustly enriched and, therefore, MEEI is due no compensation under any equitable doctrine, whether styled as unjust enrichment, quasi-contract, disgorgement, or restitution. MEEI counters that both the disclosure of its confidential information and its assent to the '591 application separately constituted a legally cognizable benefit to QLT for which MEEI deserves compensation. We consider each theory in turn.
We begin by tackling QLT's challenge to the sufficiency of the evidence undergirding the confidential information theory of unjust enrichment. We then address QLT's legal challenges to this theory. Over the course of the trial, the parties introduced copious evidence. For example, it is undisputed that QLT agreed not to disclose MEEI's confidential information to any person or entity other than its corporate counsel and employees. [12] Nevertheless, there was evidence that QLT contacted CIBA Vision suggesting a strategic partnership, and specifically proposed Dr. Miller's work as an interesting possibility that QLT and CIBA Vision should jointly pursue. Believing the use of Dr. Miller's name would bolster QLT's credibility with CIBA Vision, Dr. Ed Levy used her name in further marketing materials. And in December of 1993, without Dr. Miller's permission, Dr. Ed Levy sent CIBA Vision portions of Dr. Miller's research results  results that QLT had agreed to keep confidential. The information disclosed included Dr. Miller's findings pegging the optimal irradiance level at 600 mW/cm, which formed the basis for the FDA approved irradiance level for Visudyne. When CIBA expressed an interest in collaboration, but requested additional information, QLT promised to provide it, even though it needed Dr. Miller's permission to provide such information. QLT had an incentive to provide additional information. Although CIBA Vision had expressed an interest in QLT's BPD product, it was concurrently developing its own compound for eye treatments. It was therefore unsurprising that Dr. Ed Levy asked Dr. Miller to present her work directly to CIBA Vision in Switzerland, and offered to compensate MEEI fairly for its invention if Dr. Miller made such a presentation. Indeed, Dr. Levy confirmed his oral promise with written assurances that QLT would contact MEEI regarding a licensing agreement. There was further evidence at trial that Dr. Miller's presentation was a salient consideration in CIBA Vision's decision to pursue its partnership with QLT. In its Letter of Understanding with QLT, CIBA Vision wrote that Dr. J. Miller's (Harvard University) presentation has impressed and convinced us that Photodynamic Therapy will be the treatment of Age-related macular degeneration of the future. CIBA Vision went on to propose a joint-development of Visudyne under the CIBA-umbrella agreement. In June 1994, QLT and CIBA executed the Letter of Intent, which suggested that CIBA's decision to partner with QLT resulted from the disclosure of MEEI's research. Even after these initial steps toward collaboration, CIBA Vision pressed QLT for additional information about MEEI's work. In June 1994, CIBA wrote that it was essential that Dr. Miller shares all the information and statistics with us (emphasis in original). Moreover, CIBA Vision explained that it was equally essential that Dr. Miller personally give a demonstration directly to CIBA Vision representatives. Faced with these requests, QLT again solicited Dr. Miller's cooperation, and once again promised to license the technology from MEEI. Dr. Miller obliged by providing additional confidential information, some of which was not included in previously published work or in her presentation to an opthalmological conference. Moreover, the QLT-CIBA Vision partnership agreement required the disclosure of any of Dr. Miller's preclinical work not previously disclosed (a disclosure that would also have required Dr. Miller's assent). In a familiar pattern, QLT obtained Dr. Miller's cooperation with the promise of a licensing deal. Finally, there was evidence at trial suggesting that by 1992-1993, QLT was in serious need of a financial partnership. By 1992, QLT had been in business for nearly ten years, but had failed to post a profit. There was also evidence suggesting that QLT required additional funding for product development. The evidence was sufficient for the jury to find that each element of unjust enrichment was satisfied. QLT promised Dr. Miller that it would pay MEEI fair compensation for the right to disclose her confidential research. QLT made similar promises to secure Dr. Miller's active cooperation at times when such cooperation was critical to the courting of CIBA Vision. This evidence supported the jury's finding that Dr. Miller's efforts constituted a benefit to QLT (which QLT sought and appreciated). The jury could rationally infer that, if QLT did not value either the ability to disclose Dr. Miller's confidential research results or the credibility that Dr. Miller (and MEEI) gave QLT in its overtures to CIBA Vision, QLT would not have made so many promises to pay fair compensation to MEEI. Accordingly, the jury concluded that QLT obtained a significant benefit from the early disclosure of Dr. Miller's confidential information and from Dr. Miller's active involvement in the courtship of CIBA Vision, without which QLT's collaboration with CIBA Vision may not have borne fruit. Finally, the evidence permitted a finding that the benefit and detriment were incurred in a context in which MEEI expected compensation. Despite QLT's arguments to the contrary, we find no legal impediment to this conclusion. See 41 C.J.S. Implied Contracts § 9 (A `benefit' for purposes of an unjust enrichment claim is any form of advantage that has a measurable value, including the advantage of being saved from an expense or loss.); Anisgard v. Bray, 11 Mass.App.Ct. 726, 419 N.E.2d 315, 318 (1981) (finding the conferral of a benefit (and ultimately unjust enrichment) where plaintiff contributed substantially to a venture and, after inconclusive contract negotiations, defendants used plaintiff's contributions without compensation); see also Mass. v. Mylan Lab., 357 F.Supp.2d 314, 323-24 (D.Mass.2005) (noting that inflation of average drug wholesale price may constitute benefit where such inflation resulted in higher payments from other providers). Moreover, given Dr. Miller's repeated requests for compensation and QLT's repeated assurances that it would pay such compensation in the form of a licensing agreement, we see little reason to disturb the jury's conclusion that QLT's retention of the benefits it received would be unjust under the circumstances. QLT argues that the evidence adduced at trial was legally insufficient to permit the jury to find any causal relationship between the disclosure of confidential information and QLT's eventual Visudyne sales. To support this proposition, QLT primarily relies on Demoulas v. Demoulas Super Mkts., 424 Mass. 501, 677 N.E.2d 159, 196 (1997). That case is inapposite. [13] Demoulas involved the usurpation of corporate opportunities, breach of fiduciary duty, and restitution. The court held as a matter of law that one who is unjustly enriched due to the diversion of corporate opportunities and/or the breach of a fiduciary duty is entitled to a credit for amounts that she personally invests. Id. at 195. The court explained that [t]he purpose of this credit is to prevent an injured plaintiff from receiving more than the amount by which the defendant has benefited from the wrongful transaction. Determining the amounts to be credited ... is a factual issue ... The burden of proof is on the defendants to show how much of any entity's assets are not the direct or indirect results of the violations of fiduciary duty. Id. at 196. (citation omitted, emphasis added). Thus, the most that Demoulas can stand for here is that QLT should have had the opportunity to prove that its Visudyne profits did not derive entirely or even partially from the disclosure of MEEI's confidential information. QLT presented a vigorous defense. During the course of this defense, QLT's position was that its partnership with CIBA Vision was not dependent on the disclosure of MEEI's confidential information. QLT further urged that it was entitled to a Demoulas -type credit through its damages expert. As we explore in our later discussion of damages, the jury and the trial court rejected QLT's first argument but partially credited the second; the jury awarded MEEI only a portion of the damages that it sought, properly leaving the remainder of the profits for QLT. Demoulas does not require a contrary result. QLT's remaining arguments that it was not unjustly enriched are equally unavailing. First, QLT argues that MEEI was not entitled to prevail on a theory of unjust enrichment based on the disclosure of confidential information because the trial court granted QLT judgment as a matter of law with respect to MEEI's related trade secrets claim. [14] The trial court granted judgment to QLT on the trade secret claim because (1) MEEI failed to identify specific trade secrets and prove that QLT's disclosure of such secrets directly resulted in commercial advantage, (2) MEEI did not demonstrate that any of its trade secrets were actually incorporated into Visudyne, and (3) that to the extent any trade secrets were used in Visudyne or to entice CIBA Vision, Dr. Miller voluntarily disclosed them in advance of the launch of Visudyne. MEEI-III, 495 F.Supp.2d at 211. QLT argues that MEEI's unjust enrichment claim suffers from the same infirmities, so that to the extent that it relies on disclosure of confidential information, the unjust enrichment claim must also fall. [15] In rejecting this argument, the trial court relied on long-standing Massachusetts case law differentiating between an action for the misappropriation of trade secrets and one for unjust enrichment based on the improper use of confidential information. Id. Based on this distinction, the trial court found that although the evidence was insufficient to support a claim for misappropriation of trade secrets, the evidence was sufficient to support a finding of unjust enrichment based on the improper use of confidential information. Id. (The misappropriation of trade secrets claim ... required MEEI to show that it had taken steps to keep secret confidential information and that QLT had breached unjust enrichment requires MEEI to show only that QLT used MEEI's confidential information at MEEI's expense.) (citations omitted). QLT argues that the trial court drew an impermissible distinction between these claims. We disagree. In our prior opinion, as QLT points out, we recognized a limited linkage between the trade-secret claim and the confidential information theory of unjust enrichment. See MEEI-II, 412 F.3d at 238. What QLT overlooks is that we specifically held that, although MEEI could not recover separately under each theory, it should have the opportunity to prove the distinct elements of its unjust enrichment and trade secrets claims. Id. at 238 n. 13 (emphasis added). Massachusetts law provides two distinct theories of recovery based on the improper use of confidential information: misappropriation of trade secrets and unjust enrichment. Compare Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 282 N.E.2d 921 (1972)(requiring proof of proper and reasonable steps to protect secrecy of information and proof with particularity of trade secrets used by defendants), with USM Corp. v. Marson Fastener Corp., 379 Mass. 90, 393 N.E.2d 895, 903 (1979) (noting that confidential business information not rising to the level of trade secret is nevertheless entitled to protection); Barry v. Covich, 332 Mass. 338, 124 N.E.2d 921, 924 (1955) (noting that constructive trust is available to prevent unjust enrichment based on wrongful use of information confidentially given), and Warsofsky v. Sherman, 326 Mass. 290, 93 N.E.2d 612, 616 (1950) (finding information regarding proposed re-purchase of assets given to bank officer was confidential information and imposing equitable relief where bank officer misused such information). [16] The fact that in our prior decision we framed our analysis of a statute of limitations defense by using a single factual summary for both claims, see MEEI-II, 412 F.3d at 238, obviously does not change this bedrock principle of Massachusetts law. Thus, the entry of judgment with respect to the trade secrets claim did not legally compel the same result with respect to the unjust enrichment claim. Finally, QLT argues that there was insufficient evidence to support unjust enrichment based on use of confidential information because the information at issue was not confidential. QLT advances this claim by noting (1) the publication of some of Dr. Miller's work on March 15, 1994, and (2) her subsequent presentation to an opthalmological conference. There was evidence that both QLT and CIBA were aware of the imminent public disclosure of Dr. Miller's work. Despite this knowledge, CIBA felt that expeditious access to all of Dr. Miller's work (including research that was scheduled for publication and material that was not slated for disclosure) was essential. Similarly, the jury could have found that QLT saw value in acceding to CIBA's demands for information while it was still competing with CIBA's internally developed BPD compound. Based on this and other evidence, the jury reasonably could have concluded that much of the information shared with CIBA Vision was confidential because it was disclosed before publication, and that this prompt disclosure was valuable to QLT despite the imminent publication of many aspects of this research. [17] Accordingly the jury could find that QLT was unjustly enriched when it did not pay any compensation for the disclosure of Dr. Miller's confidential research and her cooperation in the courtship of CIBA Vision.
QLT also challenges the jury's finding of unjust enrichment based on the patent application theory. QLT's primary quarrel with this theory relates to its legal underpinnings. We considered and rejected most of these arguments in our prior opinion, and QLT's new arguments fare no better. The patent application theory centers on the joinder of the MEEI-only '473 patent application with the combined '591 application. MEEI claimed that QLT, by promising compensation commensurate with sole-ownership, induced MEEI's cession of the '473 application, in which its researchers were the only listed co-inventors, in favor of the '591 application, which included coinventors from MGH and QLT. At its heart, this claim represents a straightforward request for compensation for a benefit conferred and appreciated in a non-gratuitous context. But the benefit at issue in this case falls near the penumbra of federal patent law. Consequently, the parties have partially succumbed to the gravitational pull of patent law and have raised several arguments that directly implicate patent law. As a consequence, we review at the outset those issues that we left open in our prior opinion and which were therefore available for exploration at trial. Doing so will serve to sharpen our focus on the parties' contentions deserving closer attention. We previously noted that although the proper inventorship of the patent applications at issue is a non-negotiable question of federal patent law, the question of which application to prosecute was a choice available to the parties. MEEI-II, 412 F.3d at 232. Consequently, we explained that if QLT induced MEEI to abandon a more limited claim (embodied in the '473 application or a similar MEEI-only application that did not raise prior art issues) in favor of the broader '591 claim by promising compensation, and then did not pay such compensation, QLT would be unjustly enriched. Id. at 234 n. 7. In reaching this conclusion, we explicitly rejected QLT's invitation to find that it had not been enriched because MEEI retained the right to obtain (and in fact did obtain) an MEEI-only patent in its own name. Id. Rather we emphasized that the proper inquiry was whether, as a result of unjust conduct (i.e., making a promise and then failing to keep it), QLT retained royalties that it would have had to forgo had it not committed such unjust conduct. [18] Id. The parties have vigorously disagreed as to how to interpret our mandate. The trial court found that MEEI had to prove two key points: (1) the existence of an agreement whereby MEEI would abandon prosecution of the '473 application in exchange for fair compensation; and (2) that QLT's failure to honor this agreement resulted in unjust enrichment. QLT objects to this framework. Instead, QLT strenuously argues that our prior decision and other precedent required MEEI to prove that it specifically conferred a patent benefit. The authority that QLT advances to support this proposition is Incase, Inc. v. Timex, Corp., 488 F.3d 46 (1st Cir.2007). Incase, however, merely held that a party claiming unjust enrichment in Massachusetts must present evidence as to the amount of the unjust enrichment. Id. at 54-55. [19] We did not there state that some benefits were compensable and others were not. Rather, Incase largely involved consideration of the proof of the amount of unjust enrichment, without commenting on the nature of the benefit supporting a claim. Indeed, the fact that a patent application is the breeding ground of an unjust enrichment claim, such as the present one, does not require proof of a patent benefit. See Thompson v. Microsoft, Corp., 471 F.3d 1288, 1291-92 (Fed.Cir.2006)(finding that state law claim of unjust enrichment did not present a question of patent law). [20] Accordingly, we reject QLT's contention that MEEI was required to prove a patent benefit. QLT's next prong of attack relies on the fact that the summary judgment posture of our prior decision obliged us to assume that both the '473 and '591 applications were valid. MEEI-II, 412 F.3d at 233 n. 5. QLT argues that after a trial on the merits, this presumption should fall away. Additionally, QLT argues that the evidence at trial cannot support a conclusion that any MEEI-only patent was in fact valid. Even if QLT's position potentially has merit, it is beside the point. The central thrust of our prior decision was that it was possible that QLT benefited from MEEI's assent to the amendment of the '473 application regardless of the validity of any MEEI-only application. The trial court found that MEEI had presented overwhelming evidence that MEEI agreed to drop prosecution of the '473 application in exchange for fair compensation. MEEI-III, 495 F.Supp.2d at 213. The jury and the trial court credited the evidence that QLT initially softened its position regarding inventorship and eventually agreed to compensate MEEI for its consent to broaden the patent application. See id. at 214. We see no reason to disturb these findings. Moreover, QLT misses the legal significance of these findings. MEEI's cooperation in the patent application provided an important benefit at a vital time. Without MEEI's consent to the broadened '591 application, QLT would have faced significant challenges regarding its ownership of essential rights at a time when its relationship with CIBA was in its nascent stages. [21] Had MEEI declined to consent to the comingling of claims 7 and 14 of the '591 application, QLT and/or MGH would have had to engage in elaborate and lengthy proceedings to establish their co-inventorship rights, if in fact they had rights that could be vindicated. To challenge inventorship without MEEI's consent, QLT would have had to file its own, separate patent application covering the same claims, which would result in the Patent and Trademark Office declaring and adjudicating an interference proceeding, or issuing a separate patent. See Sagoma Plastics, Inc. v. Gelardi, 366 F.Supp.2d 185, 188 & n. 1 (D.Me.2005)(noting that 35 U.S.C. § 116 permits the Patent and Trademark Office to correct inventorship in a patent application only with the consent of all parties)( citing 37 C.F.R. § 1.48); 35 U.S.C. § 256 (permitting the Patent and Trademark Office to correct inventorship of an issued patent with the consent of all parties); 35 U.S.C. § 135 (describing interference proceedings). Had QLT provoked an interference, as the junior applicant, it would have borne the burden of proving that its claimed inventors met the standard of inventorship (or its earlier invention of the patent) by a preponderance of the evidence. See Environ Products, Inc. v. Furon, Co., 215 F.3d 1261, 1265 (Fed.Cir.2000). Alternatively, QLT could have waited until MEEI's patent issued, and pursued a legal challenge against the patent in an infringement suit, or pursuant to 35 U.S.C. § 256, which permits the courts to hear actions for correction of inventorship. See, e.g., Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1356 n. 1, (Fed.Cir.2004) (noting that § 256 creates a cause of action to correct inventorship). But if QLT had proceeded along this path, it would have faced the decidedly difficult challenge of proving non-joinder of inventors by clear and convincing evidence. Id. at 1364-65 ( citing Hess v. Advanced Cardiovascular Sys., Inc., 106 F.3d 976, 980 (Fed.Cir. 1997)). Thus, MEEI's joinder of its claims into a single patent application spared QLT what would have, or at least could have, otherwise been an arduous task of seeking the joinder of its favored inventors. This was a cognizable benefit, and we see no reason why QLT should be able to avoid paying compensation for this benefit. In fact, even QLT recognized that this was a valuable benefit. QLT's patent attorney advised QLT that MEEI could unilaterally file a divisional application [from the joint '591 application] based on the parent or (CIP) containing claims to neovasculature and naming MEEI inventors. A finder of fact could conclude that this was undoubtedly one more reason that QLT postponed discussion of licensing and avoided getting into a pissing match with Dr. Miller. Moreover, given the fact that QLT's relationship with CIBA Vision was in its nascent stages and the fact that Visudyne's potential in the marketplace was subject to great uncertainty, the patent application benefit could likely support a substantial valuation. In fact, the jury and the trial court appear to have credited QLT's promises to compensate MEEI as though it was the sole inventor of the claims at issue. In light of the foregoing, we believe QLT may have used more business sense in making this offer than the trial court has suggested. See MEEI-III, 495 F.Supp.2d at 214. Ultimately, however, the wisdom of QLT's promises is also beside the point; there was sufficient evidence that MEEI's cooperation in the patent application process constituted a detriment to MEEI and conferred a benefit on QLT in a non-gratuitous context. In light of QLT's vast profits and repeated promises, it would be manifestly unjust to permit QLT to retain such benefits. Against this backdrop, QLT's remaining challenges to the finding of a patent benefit are easily dismissed. Since QLT received a benefit immediately upon the broadening of the patent application, we need not analyze the impact of MEEI's later patent application or its conferral of any patent benefits during the trial. Similarly, since QLT had already benefited from the broadening of the patent application, we need not join the parties' vigorous debate as to whether QLT actually received freedom from a blocking patent. [22] The only matter remaining in the unjust enrichment claim is the propriety of the damage award.