RICHARD J. SULLIVAN, District Judge:
Defendants Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (collectively, "Enzo") bring counterclaims against Plaintiffs Roche Diagnostics GmbH and Roche Molecular Systems, Inc. (collectively, "Roche"), for breach of contract, tortious interference, and unfair competition under New York law, as well as for patent infringement under federal law.
Enzo and Roche are biotechnology companies involved in the research, development, manufacture, and sale of biotechnology products. (First Am. Compl. ¶¶ 1, 4) In April 1994, Roche — by way of its predecessor-in-interest, Cornage International Ltd. — entered into a distribution and supply agreement with Enzo (the "Distribution Agreement" or the "Enzo-Roche Agreement") regarding certain products (the "Products") used in nucleic acid labeling and detection. (56.1 Stmt. ¶ 1, 3.)
Under the Agreement, Roche was authorized to sell and distribute the Products, subject to various restrictions based on the type of Product and its use. (Id. H 2.) In particular, the Agreement divided the Products into eight groups — A, A, C, D, K, K', El, and E2 — and imposed group-specific restrictions on each. Additionally, all of the Products were limited to "research use only and [were] not intended for or to be used for diagnostic or therapeutic use." (Decl. of Robert J. Gunther, dated Dec. 21, 2011,
The Enzo-Roche Agreement became effective on April 25, 1994 and was scheduled to terminate upon the expiration of the last Enzo patent listed in Exhibit A to the Agreement. (DA § XIV.) As certain Enzo patents expired, however, Roche began to withhold some payments and to make others under reservation, and by July 2004, Roche altogether ceased making payments to Enzo under the Distribution Agreement. (56.1 Stmt. ¶¶ 10-11.)
Roche commenced this action by filing the Complaint on May 28, 2004 (Doc. No. 1), and on January 21, 2005, it filed the Amended Complaint (Doc. No. 16). Enzo filed its First Amended Answer and Counterclaims (the "FAAC") on February 22, 2005 (Doc. No. 18), asserting the claims for breach of contract, patent infringement, tortious interference, and unfair competition that are at the heart of the instant motion.
This case was originally assigned to the Honorable John E. Sprizzo, District Judge, but after Judge Sprizzo passed away in December 2008, the case was reassigned to my docket on January 8, 2009. (Doc. Nos. 5, 39.) From March 13, 2009 until August 25, 2011, this action was stayed while a related case was appealed to the Federal Circuit. (Doc. Nos. 44, 65, 67.) On September 24, 2012, following a renewed round of briefing by Roche and the defendants in related patent-infringement cases, the Court granted in part and denied in part Roche's motion for summary judgment with respect to multiple patent claims asserted by Enzo. (Doc. No. 83.)
Roche filed the instant motion for summary judgment on April 11, 2013, focusing on Enzo's non-patent claims and asserting a contractual basis for dismissing Enzo's remaining patent claims. (Doc. No. 102.) After receiving leave to take additional discovery ahead of Roche's motion, Enzo filed its opposition on May 2, 2013. (Doc. No. 107.) Roche replied on May 16, 2013. (Doc. No. 111.) On August 21, 2013, Roche submitted supplemental authority in support of its motion (Doc, No. 116), to which Enzo responded on August 28 (Doc. No. 118). Finally, on October 7, 2013, Roche sought leave to supplement the summary judgment record, which the Court denied on October 23, 2013. (Doc. No. 126.)
Pursuant to Federal Rule of Civil Procedure 56(a), a court may not grant a motion for summary judgment unless "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter
Roche moves for summary judgment on Enzo's counterclaims for breach of contract, patent infringement, tortious interference, and unfair competition. The Court will address these claims in turn.
Enzo asserts three distinct breaches of the Distribution Agreement. (Mem. at 1-2.)
Roche seeks summary judgment on each of these three breach-of-contract claims. Under New York law, the first step in assessing a contract claim is to determine " "whether the contract is unambiguous with respect to the question disputed by the parties.'" Law Deben. Trust Co. v. Maverick Tube Corp., 595 F.3d 458, 465 (2d Cir.2010) (quoting Int'l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 83 (2d Cir.2002)). That "is a question of law for the court," Id. "Summary judgment is appropriate if the terms of the contract are unambiguous." Fischer & Mandell LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir.2011) (citing Topps Co. v. Cadbury Stani S.A.I.C., 526 F.3d 63, 68 (2d Cir.2008)). "On the other hand, under New York law, contract claims are generally not subject to summary judgment if the resolution of a dispute turns on the meaning of an ambiguous term or phrase." Fed. Ins. Co. v. Am. Home Assur. Co., 639 F.3d 557, 567 (2d Cir.2011) (citing State v. Home Indem. Co., 66 N.Y.2d 669, 495 N.Y.S.2d 969, 971, 486 N.E.2d 827 (1985)) (other citation omitted). "However, where language in a contract is ambiguous, summary judgment can be granted `if not the non-moving party fails to point to any relevant extrinsic evidence supporting that party's interpretation of the language.'" Id. (quoting Co. Fin. de CIC et de L'Union Euro. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 158 (2d Cir.2000)).
Enzo's first breach-of-contract claim contends that Roche violated use restrictions imposed by the Enzo-Roche Agreement. The Court concludes that the use restrictions in the Distribution Agreement are ambiguous and that Enzo has produced evidence that supports its interpretation contract, so summary judgment is not appropriate.
Under the Agreement, Enzo appointed Roche as a "nonexclusive distributor for the distribution and sale of Products to the research market subject to the conditions of [the] Agreement." (DA § II.) The Agreement further explained that "all Products are for research use only and are not intended for or to be used for diagnostic or therapeutic use." (DA § XV.) Unhelpfully, the Agreement does not define "research market" or "research use," and critically, the Distribution Agreement never clarifies whether the research market includes applied research or only basic research or some sort of middle ground between the two. As a result, these restrictions are ambiguous. Because Enzo has provided evidence that would tend to prove that the Distribution Agreement forbade sales to "pharmaceutical and industrial/diagnostics companies ... [whose] efforts, including research, ultimately are directed to the development and marketing of commercial products, such as drugs, for diagnostic and therapeutic purposes" (Decl. of Elazar Rabbani, dated Apr. 30, 2013, Doc. No. 104, ¶ 5), the Court cannot conclude as a matter of law that Roche did not breach the Distribution Agreement when it sold Products to (2) Oncor for putatively diagnostic uses (Moore Decl. Ex. 14 at 28; id. Ex. 15); (2) non-parties Roche Pharma and Roche Vitamins for the development of cancer-research products (see Gunther Decl. Ex. 10 ¶ 5; Moore Decl. Ex. 19 at 53:15-20; id. Exs. 48, 49; Opp. at 10-11); or (3) Quest Diagnostics, which the evidence suggests provides only diagnostic services and which Roche's sales spreadsheet lists under "Industrial/Diagnosti[c]" sales (Moore Decl. Ex. 12 at 10-12, 13-15; id. Ex. 13).
To stave off this use-restriction claim, Roche notes that it was "not prohibited from selling products to commercial entities that were intending to use (or did use) those products in a research setting." (Mem. at 12.) Roche's observation is true to a point. Nothing in the Distribution Agreement indicates that Roche was barred from selling Products to commercial entities — it is conceivable that a commercial Product — buyer might conduct "research" within the meaning contemplated by the Distribution Agreement. The trouble with Roche's argument is that it is not clear what, precisely, constitutes a "research setting" as that term is used by Roche. Given this ambiguity, and for the reasons explained above, the Court cannot conclude that Roche's sales did not exceed the research-only restrictions in the Distribution Agreement. Accordingly, summary judgment as to this claim is denied.
Enzo next contends that Roche manufactured ten to eleven grams of bionucleotides even though the Distribution Agreement required that Roche purchase such Products from Enzo. However, the plain language of the Enzo-Roche Agreement does not impose any limitation on Roche's production of bio-nucleotides for its personal use; it prohibits Roche only from purchasing bio-nucleotides from other sellers. (DA § II.A (requiring Roche to "purchase exclusively from Enzo[,] ... such quantities of the Group A Products as [Roche] may order in accordance with th[e] Agreement").) Therefore, Roche is entitled to summary judgment on this claim.
This conclusion is reinforced by other provisions of the Distribution Agreement. For example, Section III.A demonstrates that the parties used the traditional requirements-contract phrasing when they sought to establish such a provision: "Enzo shall purchase its requirements for Group A', C, and K' Products from [Roche]." (DA § III.A.) Had the parties sought to place a similar restriction on Roche with respect to bio-nucleotides, they certainly knew how to draft it, but they obviously declined to do so. See Network Publ'g Corp. v. Shapiro, 895 F.2d 97, 99 (2d Cir.1990). Accordingly, the Court grants summary judgment in favor of Roche on Enzo's claim for breach of Section II.A of the Distribution Agreement.
Enzo's final breach-of-contract claim asserts that Roche failed to make payments for Products that it sold after Enzo's patents, which covered the relevant Products, had expired. Because Enzo never alleged this breach of contract in its pleadings, the Court grants summary judgment in favor of Roche.
In its list of counterclaims, the FAAC makes no mention of Roche's failure to comply with the payment provisions of Section IV of the Agreement, even though Enzo filed its counterclaims in 2005 — more than a year after Roche allegedly started skipping payments on Products. (See generally FAAC ¶¶ 47-59 (Enzo's claims for breach of contract).) The Court will not permit Enzo to raise new claims for breach of contract at this late stage. It is well settled that a party may not amend its pleadings in its briefing papers. See Avillan v. Donahoe, 483 Fed.Appx. 637, 639 (2d Cir.2012) (citing Wright v. Ernst & Young LLP, 152 F.3d 169, 178 (2d Cir. 1998)); see also Bonnie & Co. Fashions, Inc. v. Bankers Trust Co., 170 F.R.D. Ill, 119 (S.D.N.Y.1997) ("[I]t is inappropriate to raise new claims for the first time in submissions in opposition to summary
Roche moves for summary judgment on Enzo's patent claims on the theory that the Distribution Agreement authorized Roche to use Enzo's patented property. To the extent that Roche can show that its use of the Products was permitted under the terms of the Distribution Agreement, Roche may well be insulated from liability for patent infringement. Nevertheless, because the Court has concluded that the Distribution Agreement is ambiguous, and cannot conclude as a matter of law that Roche's activities fell within the Agreement's use authorization, Enzo's patent infringement claims remain viable. Accordingly, the Court cannot grant summary judgment as to the remaining patent claims.
In addition to its claims for breach of contract and patent infringement, Enzo also asserts a claim for tortious interference with contract. Specifically, Enzo contends that it had a valid contract with Affymetrix, but that Affymetrix breached that Agreement when it began dealing with Roche. (Opp. at 20-23.) At the outset, the Court notes that the FAAC styles Enzo's claim as one for tortious interference with business relations (FAAC ¶¶ 76-83), which is a different cause of action consisting of different elements than tortious interference with contract. Catskill Dev., L.L.C. v. Park Place Entm't Corp., 547 F.3d 115, 132 (2d Cir.2008) ("The [additional] wrongful means requirement [for tortious interference with business relations] makes alleging and proving a tortious interference claim with business relations `more demanding' than proving a tortious interference with contract claim." (quoting Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 632, 406 N.E.2d 445 (1980))). As stated above, summary judgment is warranted on this basis alone — a party may not amend its cause of action in its brief opposing summary judgment. See Avillan, 483 Fed.Appx. at 639. Nevertheless, even if the Court reached the merits of Enzo's claim, it would still fail.
With regard to knowledge, Enzo's evidence does not show that Roche had actual knowledge of the Affymetrix Agreement — only that the contract was published in Affymetrix's quarterly filing with the SEC. (56.1 Stmt. ¶ 26 (citing Moore Decl. Ex. 33); Opp. at 21 (same).) That sort of constructive knowledge is inadequate to demonstrate Roche's knowledge for purposes of tortious interference. See Monex Fin. Servs. Ltd. v. Dynamic Currency Conversion, Inc., 19 Misc.3d 1113(A), 859 N.Y.S.2d 904, 2008 WL 880209 at *7 (Sup.Ct. Mar. 26, 2008) (citing Burns Jackson Miller Summit & Spitzer v. Lindner, 88 A.D.2d 50, 452 N.Y.S.2d 80, 93 (App.Div.1982) (noting the historical requirement of "actual knowledge on the part of the defendant of the contract's existence" and applying that actual knowledge requirement to tortious interference with business relations)); AA Tube Testing Co. v. Sohne, 20 A.D.2d 639, 246 N.Y.S.2d 247, 248 (App.Div. 1964) ("As an essential element of the cause of action sought to be pleaded the plaintiff must allege that the defendants had actual knowledge; an allegation that they `should have known' of the existence of the contract is insufficient."); Roulette Records, Inc. v. Princess Prod. Corp., 15 A.D.2d 335, 224 N.Y.S.2d 204, 207 (App.Div.1962) (reversing a tortious interference judgment for lack of evidence of "actual knowledge"). Therefore, Enzo's claim fails on this element.
Likewise, Enzo has not provided evidence of Roche's intent. To satisfy this element, it is not enough that a defendant engaged in conduct with a third-party that happened to constitute a breach of the third party's contract with the plaintiff; instead, the evidence must show that the defendant's objective was to procure such a breach. See High Falls Brewing Co., LLC v. Boston Beer Corp., 513 Fed.Appx. 12, 13 (2d Cir.2013) (citing White Plains Coat & Apron Co. v. Cintas Corp., 8 N.Y.3d 422, 835 N.Y.S.2d 530, 532, 867 N.E.2d 381 (2007)); see also id. at 13-14 (requiring that "the target of [defendant's] conduct was [the third party's] contractual arrangements with" the plaintiff). Put simply, a defendant must specifically intend to interfere with the relevant contract. Am. Cyanamid Co. v. Elizabeth Arden Sales Corp., 331 F.Supp. 597, 608 (S.D.N.Y.1971) (citing Lamb v. S. Cheney & Son, 227 N.Y. 418, 125 N.E. 817, 818 (1920)). On this element, the evidence shows only that, in contravention of the Affymetrix Agreement, Affymetrix used component terminal transferase provided by Roche. (Moore Decl. Ex. 32 § 1(a), Ex. B (Affymetrix Agreement, including terms for component terminal transferase); id. Exs. 35-38 (e-mails indicating Affymetrix's use of Roche's component terminal transferase).)
Without evidence that Roche knew about the Affymetrix Agreement or intentionally induced Affymetrix to breach it, Enzo could not carry a claim for tortious interference with contract, even if it had asserted that claim in its pleadings. Accordingly, the Court grants summary judgment in Roche's favor on this claim.
Finally, Enzo contends that Roche engaged in unfair competition in violation of New York state law. This claim simply repeats the earlier claims against Roche for "sales of Enzo's Products outside of the research market" and for Roche's "collaborat[ion] with Affymetrix to develop Ampli-Chip CYP450 and other products." (Opp. at 24.) Enzo argues that "Roche engaged in these acts in bad faith and was unjustly enriched. In acquiring Enzo Products with knowledge of the market and use restrictions, and procuring the breach of the Enzo-Affymetrix Agreement, Roche ultimately ended up competing with Enzo in a market it was never entitled to enter." (Id.) Notably, this, section of Enzo's brief makes no citation to the record nor does it bear any relation to the common Jaw cause of action for unfair competition.
New York has "long recognized two theories of common-law unfair competition: palming off and misappropriation." ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467, 850 N.Y.S.2d 366, 372, 880 N.E.2d 852 (2007) (answering the Second Circuit's certified question with respect to the reach of a claim for unfair competition) (citations omitted). "Palming off is the "sale of the goods of one manufacturer as those of another," which is neatly illustrated by "a defendant [who] substitute[s] its product for plaintiffs when customers specifically asked for the plaintiffs product."" Id. at 372 & n. 2, 880 N.E.2d 852 (quotation marks, citations, and alterations omitted). The related theory of "misappropriation" relies on the "principle that one may not misappropriate the results of the skill, expenditures[] and labors of a competitor" and is best illustrated by a defendant's arrogation of the goodwill of the plaintiff by using the plaintiff's name, trademark,
For the reasons stated above, summary judgment is denied with respect to Enzo's claim that Roche violated the use restrictions in the Distribution Agreement, but Roche's motion is granted in all other respects. The Clerk of the Court is respectfully directed to terminate the motion pending at Doc. No. 102.
IT IS HEREBY ORDERED THAT this case will proceed to trial and that, by December 20, 2013, the parties shall submit a joint letter setting forth which, if any, of Roche's claims against Enzo are still live and proposing a trial date and a pretrial schedule, including discovery deadlines for the issue of damages.
SO ORDERED.