Court Opinion

ID: 203684
Source: CourtListenerOpinion
Date Created: 2011-02-07 06:21:28+00
Date Added: 2024-06-11T13:09:36.419783
License: Public Domain

United States Court of Appeals
                        For the First Circuit

Nos. 07-2615, 07-2616

                MASSACHUSETTS EYE AND EAR INFIRMARY,

     Plaintiff/Counterclaim Defendant-Appellee/Cross-Appellant,

                                  v.

                    QLT PHOTOTHERAPEUTICS, INC.,

                              Defendant.

                              QLT, INC.,

          Counterclaim Plaintiff, Appellant/Cross-Appellee,

                                  v.

                 MASSACHUSETTS EYE AND EAR INFIRMARY;
         EVANGELOS S. GRAGOUDAS, M.D.; JOAN W. MILLER, M.D.,

        Counterclaim Defendants, Appellees/Cross-Appellants.

                                 Before
                      Howard, Baldock1 and Selya,
                            Circuit Judges.
                        __________________________

                           ORDER OF COURT
                     Entered: February 23, 2009

          QLT has filed a petition for rehearing of our decision in
this case.    One substantive issue presented in that petition
warrants elaboration.      QLT highlights an objection to the
confidential information theory of unjust enrichment raised in its
brief   and   addressed   implicitly   in   our   prior   decision.
Specifically, QLT argues that the voluminous evidence of its unfair

1
    Of the Tenth Circuit, sitting by designation.
behavior and repeated promises of compensation in exchange for
MEEI's confidential information, introduced at trial and recited in
our opinion, cannot support the conclusion that QLT profited from
the use of MEEI's confidential information. Absent such a showing,
QLT argues that the general principle that those who chose to make
their work public must rely exclusively on patent law for
protection of their work, Bonito Boats, Inc. v. Thunder Boats,
Inc., 489 U.S. 141, 149 (1989), requires judgment in favor of QLT
with respect to this theory. In making this argument, QLT concedes
-- as it must -- that it is liable in unjust enrichment for any
information it obtained and profited from as a result of its
confidential relationship with MEEI and its researchers. Univ. of
Colo. Found., Inc., v. Am. Cyanamid, Co., 342 F.3d 1298, 1306-07
(Fed. Cir. 2003); see also Bonito Boats, Inc., 489 U.S. at 155
(citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974));
Russo v. Ballrad Medical Products, 550 F.3d 1004 (10th Cir. 2008).
Thus, QLT has done nothing more than pour its old sufficiency of
the evidence challenge into a new bottle.
     Despite this emphasis on preemption, QLT's argument remains
unavailing.     There was evidence that QLT initiated its
communications with CIBA with a confidential abstract that was
submitted for publication but not yet published. There was further
evidence that QLT was in difficult financial straights and
therefore was eagerly seeking a partner, and that QLT was competing
against CIBA's internally-developed competitor to BPD.           In
addition, there was evidence that QLT needed Dr. Miller's assent to
disclose all of her research results to CIBA Vision, some of which
were published in March 1994, some of which were disclosed at a
subsequent presentation, and some of which were never disclosed.
The jury heard further evidence that both QLT and CIBA Vision were
aware of Dr. Miller's publication and scheduled presentation, but
that CIBA nevertheless felt expeditious access to Dr. Miller and
all of her research results was "essential" to evaluating BPD.
Indeed, even after Dr. Miller's public disclosures of portions of
her work, CIBA continued to press for access to all of Dr. Miller's
as-yet undisclosed work.   Finally, the jury heard evidence of Dr.
Miller's concerns that she and MEEI be compensated fairly for her
research and QLT's repeated promises to pay such compensation in
exchange for Dr. Miller's personal involvement and her permission
expeditiously to disclose her research results.2         From this
evidence, a reasonable fact-finder could conclude that QLT unfairly

2
  QLT's argument that information disclosed subsequent to the
publication and conference was valueless is a difficult one to
make, in view of the fact that QLT made repeated offers of
compensation to obtain such information. Although those promises
are not enforceable, the very fact that the promises were made is
demonstrative of the value that QLT placed on receiving Dr.
Miller's cooperation in disclosing this additional information.
used MEEI's confidential information at MEEI's expense and that
QLT's use of MEEI's confidential information was a substantial
causal factor in the QLT-CIBA partnership.
     Neither Bonito Boats, nor the other precedents on which QLT
relies preclude recovery once such a conclusion is established.
QLT's liability stems from its exploitation of information that it
obtained in confidence, pursuant to a confidential disclosure
agreement, and received permission to disclose through offers of
compensation -- not from published articles or presentations at
ophthalmology conferences. Thus, QLT's liability flows from its
less than savory business practices rather than its reliance on
public domain sources of information. This is not the stuff of
preemption. See Kewanee Oil Co., 416 U.S. at 480-81 (declining to
find Ohio trade secrets statute preempted because, inter alia,
"[t]he necessity of good faith and honest, fair dealing is the very
life and spirit of the commercial world") (internal quotation
omitted); see also Bonito Boats Inc., 489 U.S. at 155-56
(reaffirming authority of states to regulate use of intellectual
property not inconsistent with federal law); Confold Pacific, Inc.
v. Polaris Industries, Inc., 433 F.3d 952, 956, 959-960 (7th Cir.
2006) (finding no unjust enrichment based on misuse of confidential
information where Wisconsin law did not permit such a cause of
action, and plaintiff failed to plead unfair competition or secret
misappropriation under Wisconsin law); Waner v. Ford Motor Co., 331
F.3d 851, 856 (Fed. Cir. 2003) (finding dismissal of unjust
enrichment claim appropriate where information was not trade secret
and defendant was under no obligation to maintain confidentiality).
Indeed, the Supreme Court has suggested that states should continue
to regulate just these sorts of less-than-upright business
practices, even if they incidently involve intellectual property
and information that may be subject to federal patent laws.3 See
Bonito Boats, 489 U.S. at 156 (citing Aronson v. Quick Point Pencil
Co., 440 U.S. 257, 262 (1979)).
     Accordingly, with this clarification of our decision, QLT's

3
  In order to find preemption, the Supreme Court evaluates a state
law on three dimensions: (1) whether it hinders the federal
objective of providing an incentive to invent, (2) whether it
inhibits full disclosure of inventions, and (3) whether it removes
from the public domain that which the states lack the authority to
remove. Kewannee Oil Co., 416 U.S. at 480-82; 6 Donald S. Chisum,
Chisum on Patents, § 19.03[6][l], at 19-416 (2007).      Where, as
here, the inventors eventually sought protection of patent law, QLT
and CIBA were free to exploit any of Dr. Miller's published
research after it became freely available, if they so chose, and
Dr. Miller's research was eventually published, the concerns that
might lead the Supreme Court to find preemption are not
sufficiently implicated to preempt the Massachusetts unjust
enrichment cause of action, as it applies to this case.
petition for rehearing is denied.

                              By the Court:

                              /s/ Richard Cushing Donovan, Clerk

cc: Hon. William G. Young, Ms. Sarah Thornton, Clerk, United States
District Court for the District of Massachusetts, Ms. Davison, Mr.
Ware, Mr. Cushing, Mr. Donovan, Ms. Fiacco, Mr. Ridings,        Ms.
Sereny, Mr. Chun, Mr. Helmer, Mr. Maffei, Mr. Herman, Mr. Richlin,
Mr. McKelvie, Mr. Baker, Mr. Harnett, Ms. DeFranco, Ms. Metzger-
Hare, Mr. Flattmann, Mr. Bone, Mr. Buford, Mr. Haley, Ms.
Cooleybeck, Mr. Bromberg, Mr. Biddinger, Ms. Mangasarian, Mr.
Schwartz, Mr. Taranto, Mr. Ainsworth & Mr. Panner.