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The Research Foundation of State University of New York v. Nektar Therapeutics

May 15, 2013

THE RESEARCH FOUNDATION OF STATE UNIVERSITY OF NEW YORK, PLAINTIFF,
v.
NEKTAR THERAPEUTICS, DEFENDANT.



The opinion of the court was delivered by: Gary L. Sharpe Chief Judge

MEMORANDUM-DECISION AND ORDER

I. Introduction

Plaintiff The Research Foundation of State University of New York ("RF SUNY") commenced this diversity action against defendant Nektar Therapeutics seeking specific performance, damages, and declaratory relief. (See 2d Am. Compl., Dkt. No. 67.) Pending are Nektar's motions for summary judgment dismissing the Second Amended Complaint and sanctions due to spoliation of evidence. (See Dkt. Nos. 153, 154; see also Dkt. No. 156.*fn1 ) RF SUNY has separately moved for partial summary judgment. (See Dkt. No. 155.) For the following reasons, Nektar's motion for summary judgment is granted to the limited extent that it seeks dismissal of RF SUNY's claim for specific performance. Nektar's motion for summary judgment is denied in all other respects. Moreover, upon searching the record, the court grants summary judgment to RF SUNY on a narrow issue discussed below, denies RF SUNY's motion for partial summary judgment, and denies Nektar's motion for sanctions due to spoliation of evidence.

II. Background

A. Facts*fn2

In 2003, RF SUNY, "a non-profit educational corporation" operating "pursuant to an agreement with the State University of New York [(SUNY)] to administer sponsored research programs for and on behalf of SUNY," and Nektar, a Delaware corporation and "clinical-stage biopharmaceutical company," entered into a contract (hereinafter "the Agreement") related to certain technology developed by Drs. Gerald Smaldone and Lucy Palmer, employees of SUNY. (Pl.'s Statement of Material Facts (SMF) ¶¶ 1-2, 7, 14, Dkt. No. 155, Attach. 2; Def.'s SMF ¶¶ 4, 14, Dkt. No. 156, Attach. 2.)

The technology relates to, among other things, "methods for evaluating the utility of various means and devices to deliver aerosolized agents to the lung." (Dkt. No. 154, Attach. 4 at 37.)

Under the Agreement, Nektar, which was granted an "exclusive license to the [RF SUNY] Patents and Technology, and the right to sublicense" the same, is obligated to pay RF SUNY "a fraction of Gross Sublicensing Revenues" (GSR). (Pl.'s SMF ¶ 24; Dkt. No. 154, Attach. 4, at 9.) The Agreement defines GSR as:

"all non-refundable or non-creditable milestone payments or option or license fees [Nektar] and its Affiliates receive from any non-Affiliated third party in consideration of an option to negotiate for a license or other authorization to practice TECHNOLOGY or Licensed Patents, and any milestone payments or option or license fees [Nektar] and its Affiliates receive from any non-Affiliated third party pursuant to a license, sublicense or other authorization to practice TECHNOLOGY or Licensed Patents. Royalties, amounts received to fund or reimburse research and development activities of [Nektar] and its Affiliates (including without limitation, reimbursement of those amounts incurred by [Nektar] and its Affiliates prior to granting an option to negotiate for a license or other authorization to practice TECHNOLOGY or Licensed Patents, or a license, sublicense or other authorization to practice TECHNOLOGY or Licensed Patents, as well as those amounts paid by [Nektar] to [RF SUNY] in connection with the research and development of Products), lines of credit to purchase capital related to the development or manufacture of Products, and amounts received by [Nektar] and its Affiliates for the manufacture and supply of Products (including Products for clinical trials) are not Gross Sublicensing Revenues hereunder." (Dkt. No. 154, Attach. 4 at 35.) This provision is at the heart of the parties' dispute.

The technology is part of what Nektar calls the "Amikacin Program." (Def.'s SMF ¶ 41.) In 2006, Bayer Healthcare LLC "expressed interest in jointly developing the Amikacin Program with Nektar." (Id. ¶ 69.) Bayer's interest culminated in a contract with Nektar (hereinafter "the Bayer Agreement") that, in part, granted Bayer sublicensing rights to the technology. (Id. ¶¶ 81-82.) The Bayer Agreement required Bayer to make "several 'milestone payments' if Nektar achieved certain milestone events, including execution of the [Bayer Agreement] itself." (Pl.'s SMF ¶ 34.) The first milestone payment of $50 million, which was due forty-five days from the Bayer Agreement's effective date, was characterized in the agreement as "reimbursement by Bayer for Nektar's past investment in PDDS Platform Technology, and including partial reimbursement for acquisition of Aerogen assets in connection with Exploitation of the Product." (Dkt. 154, Attach. 17 at 40; see Def.'s SMF ¶ 84.) In 2005, prior to negotiation or execution of the Bayer Agreement, Nektar had acquired Aerogen, Inc. and its intellectual property assets, which included a platform, known as PDDS, to deliver an inhaled antibiotic. (Def.'s SMF ¶ 44; Dkt. No. 154, Attach. 56 at 9; Dkt. 154, Attach. 61 at 23.) Bayer timely made the first milestone payment of $50 million. (See Def.'s SMF ¶ 101.) Bayer made a second milestone payment of $10 million to Nektar in May 2008. (See id. ¶ 123.) The Bayer Agreement required Nektar to use the second milestone to reimburse Bayer's development costs of conducting any "Phase III Clinical Trial." (Dkt. No. 154, Attach. 17 at 40-41.) Additional milestone payments may become due over the life of the Bayer Agreement depending upon the occurrence of certain events; the final such payment would become due upon the commercial launch of a particular product. (See id. at 40.)

On October 20, 2008, Nektar and Novartis Pharmaceuticals Corp. and Novartis Pharam AG (collectively "Novartis") "executed an asset purchase agreement under which Nektar transferred certain physical and intellectual property assets to Novartis in exchange for $115 million" (hereinafter "the Novartis Agreement"). (Def.'s SMF ¶ 129; see id. ¶ 25.) While the Agreement was specifically excluded from the transfer of assets from Nektar to Novartis, (see Dkt. No. 154, Attach. 35 at 2), the Novartis Agreement granted Novartis an option to sublicense RF SUNY's technology upon request (see Def.'s SMF ¶ 141; Dkt. No. 154, Attach. 34 at 50).

In July 2009, RF SUNY retained accountant Daniel Burns to "review Nektar's [research and development (R&D)] expenses associated with the Amikacin Program through an audit" expressly permitted under the Agreement. (Def.'s SMF ¶ 47.; Dkt. No. 154, Attach. 4 at 14.) More specifically, the audit was intended "to determine whether Bayer's payments to Nektar 'were reimbursement for past R&D costs.'" (Def.'s Resp. SMF ¶ 58, Dkt. No. 157, Attach. 1.) This litigation followed soon after.

B. Procedural History

RF SUNY commenced this action in November 2009. (See Compl., Dkt. No. 1.) After filing an amended complaint with the court's permission, RF SUNY filed the operative Second Amended Complaint in accordance with a stipulation of the parties. (See Dkt. Nos. 46, 47, 62; 2d Am. Compl.) In its pleading, RF SUNY asserts claims for specific performance of its auditing rights, breach of contract regarding the Bayer Agreement and Novartis Agreement, a declaration of contractual rights and future obligations under the Agreement, and a breach of the implied duty of good faith and fair dealing with respect to Nektar's negotiation, drafting, execution and/or performance of the Bayer Agreement. (See Dkt. No. 67 ¶¶ 76-102.) After joinder of issue and the completion of discovery, the parties filed the instant motions. (See Dkt. Nos. 68, 153, 154, 155.)

III. Standard of Review

A. Summary Judgment

The standard of review pursuant to Fed. R. Civ. P. 56 is well established and will not be repeated here. For a full discussion of the standard, the court refers the parties to its decision in Wagner ...


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