Roquette Freres S.A. v. Solazyme Inc.
Filing
153
MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 12/21/2015. (nmfn)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
ROQUETTE FRERES , S.A. ,
)
)
Plaintiff and Counter-Defendant, )
)
v.
) Civ. No. 14-1442-SLR
) (Cons.)
SOLAZYME, INC.,
)
)
Defendant and Counte rclaimant. )
Kenneth J. Nachbar, Esquire, Esq ui re of Morris, Nichols, Arsht & Tunnell LLP,
Wilmington, Delaware. Counsel fo r Plaintiff. Of Counsel : Douglas V. Rigler, Esquire
and Jeffrey M. Goehring , Esquire of Young & Thompson.
Frederick L. Cottrell, Ill, Esqu ire, Chad M. Shandler, Esquire and Selena E. Molina,
Esquire of Richards , Layton & Finger, PA, Wilmington, Delaware. Counsel for
Defendant. Of Counsel: Daralyn J. Durie, Esquire, Joshua H. Lerner, Esquire, Laura E.
Miller, Esquire, Timothy C. Saulsbu ry, Esquire of Durie Tangri LLP.
MEMORANDUM OPINION
Dated: December21 , 2015
Wilmington, Delaware
I. PROCEDURAL BACKGROUND
Pending before the court are multiple motions filed by the parties following an 18
month-long arbitration. Roquette Freres, S.A. ("Roquette") is a French corporation with
its principal place of business in Lestrem, France. Solazyme, Inc. ("Solazyme") is a
Delaware corporation with its principal place of business in South San Francisco,
California. The court has jurisdiction pursuant to 28 U.S.C. § 1332.
Roquette initiated the litigation by filing
an action for a declaratory judgment that any award rendered by the CPR
International Institute for Conflict Prevention & Resolution in the arbitration
between Roquette and Solazyme is invalid and vacated and that the
arbitration was terminated prior to the issuance of any award. A further
declaration is sought that Roquette and Solazyme are joint owners of the
assets, including Intellectual Property, of Solazyme Roquette Nutritionals,
LLC ("SRN") , a now dissolved 50/50 joint venture between Roquette and
Solazyme.
(Civ. No. 14-1442, D.I. 1) Roquette filed a second declaratory judgment action in which
it asserted
1) that the authority of an arbitral panel had terminated such that its order
for more discovery and new hearings is unenforceable and, 2) alternatively,
that regardless of whether the panel's authority had terminated, proposed
new discovery and hearing concerns an issue which is outside of the scope
of the arbitral agreement under which the panel purported to act.
(Civ. No. 15-125, D.I. 1) The two actions were thereafter consolidated, with all future
filings being filed only in the lead, first-filed case. (Civ. No. 14-1442, 0 .1. 14; Civ. No.
15-125, D.I. 5) 1
Solazyme's answer to Roquette's consolidated allegations included a
counterclaim for confirmation of the arbitration award pursuant to 9 U.S.C. § 207, as
1
All docket item entries, therefore, refer to the docket in Civ. No. 14-1442.
well as counterclaims asserting trade secret misappropriation and breach of contract
(0.1. 15). This pleading was followed by the filing of seven motions: (1) Solazyme's
motion for an order confirming the arbitration award (0.1. 16); (2) Solazyme's motion for
a preliminary injunction (0 .1. 26); (3) Roquette's motion for summary judgment granting
declaratory relief in its first declaratory judgment action (0.1. 43); (4) Roquette's motion
for summary judgment granting declaratory relief in its second declaratory judgment
action (0.1. 47); (5) Roquette's motion for an order vacating the arbitration award (0.1.
52); (6) Roquette's motion for summary judgment for failure to identify trade secrets
(0.1. 106); and Roquette's motion for summary judgment of Solazyme's claim for
misappropriation of trade secrets (0.1. 110). Oral argument was heard on July 28,
2015.
II. FACTUAL BACKGROUND
Roquette and Solazyme were parties to a Joint Venture Operating Agreement
dated November 3, 2010 (the "JVOA") in which they formed a joint venture called
Solazyme Roquette Nutritionals, LLC ("SRN" or the "Joint Venture"). According to the
JVOA, SRN was established for the purpose of "the research and development,
manufacture, distribution, sales, marketing and support" of products made with
"microalgae-containing and microalgae-derived substances" as ingredients for use in
human foods and beverages, nutraceuticals, and animal feeds. (0.1. 36, ex. Bat§ 2.2
and ex. A at 4 and 7) The SRN joint venture was owned 50/50 by each of its two
members.
As described in the JVOA, Roquette is a "global producer of starch and starchbased derivatives with expertise in the research, development, manufacture and sale of
2
bio-products and the provision of related marketing, distribution, technical and
administrative services, and Roquette also possesses certain intellectual property that
could be used or useful in the development and production of products in the Field .... "
(Id. at 1) Solazyme was described as "a renewable oil and bio-products company with
certain intellectual property in the area of algal biotechnology that could be used or
useful in the development and production of products in the Field." (Id.)
By 2013, "it became clear to the Parties that SRN was to dissolve" and "a dispute
arose as to the proper assignment of SRN's intellectual property. Pursuant to the
JVOA, the parties submitted to arbitration to resolve the dispute." (D.I. 15, 1127) The
parties served simultaneous arbitration demands on September 24, 2013. With both
parties citing to § 21 .1 of the JVOA,
Roquette demanded an arbitral award that it was a joint owner of SRN's
intellectual property and that said intellectual property should be jointly
assigned to Roquette and Solazyme. Solazyme demanded an arbitral
award that it was the sole owner of SRN's intellectual property because all
of SRN's intellectual property improved upon the intellectual property
Solazyme contributed to SRN ....
(D.I. 15, 1128)
The arbitral hearing commenced on September 25, 2014, and concluded on
October 2, 2014. The parties and the three arbitrators ("the Panel") agreed at the
conclusion of the hearing to the simultaneous serving of post-hearing briefs on October
23, 2014, and to keeping the hearing open until the Panel had "gotten the briefs ."2 (D.I.
2
Pursuant to the JVOA, Article 22.3(b), "[w]ithin fifteen (15) days after the
conclusion of the arbitration hearing, the arbitrators shall issue a written award and
statement of decision describing the essential findings and conclusions on which the
award is based, inclding the calculation of any damages awarded." (D.I. 36, ex. B)
3
18, ex. BB at 1363) If the Panel "had further [specific] questions, there was a potential
for a second round of follow-up briefing." (Id., ex. BB at 1366) In response to the
Panel's query about the level of detail the parties expected, counsel indicated that
Roquette expected a "reasoned award," i.e., an award that provided "a reason" with
"[t]he same detail as when we tell you the extent of the know-how." (Id., ex. BB at
1364-65)
The Panel subsequently notified the parties that the conclusion of the arbitration
hearing would instead take place on November 3, 2014, to accommodate travel abroad
by one of the arbitrators. (D.I. 45, ex. 3) According to Roquette, the deadline for filing a
decision was 15 days later, or November 18, 2014 . (D.I. 44 at 2) On November 17,
2014, the Panel issued an Order which invited a further motion practice on two issues,
the award of attorney fees and "newly discovered additional patent applications relating
to the Joint Venture;" such motions were to be filed by December 1, 2014. (D.I. 18, ex.
P) By letter dated November 26, 2014, Roquette objected to said order and to the fact
that no decision had issued within the required 15-day period. (Id., ex. Q) Roquette's
objection was overruled. (Id., ex. S) Solazyme filed its motion regarding fees and
further evidence on December 1, 2014. (Id., ex. T) In response, Roquette maintained
its objection to the jurisdiction of the Panel to resolve the parties' dispute, which
objection was, again, overruled. (Id., exs. U, V) By order dated February 10, 2015, the
Panel directed Solazyme to identify for the Panel "all of the presently known patent
applications filed by Roquette which Solazyme contends constitutes improvements to
its intellectual property and/or were based upon work done using Solazyme microalgal
4
strain and based upon Solazyme's pre-SRN know[-]how. " (Id., ex. X) Also by order
dated February 10, 2015, the Panel closed the hearing. (Id., ex. Y) The Panel's
decision ("the Award") issued on February 19, 2015. (Id. , ex. A) The Panel awarded to
Solazyme "[a]ll of the patent applications currently assigned to SRN, " as well as "[a]ll of
SRN's know-how related to the production of the SRN products" with certain identified
properties. The Panel also awarded to Solazyme "[a]ll Roquette patent applications
filed on or after November 3, 2010 relating to microalgal foods , microalgal food
ingredients, and microalgal nutritionals, as well as all methods relating to making and
using the same, including but not limited to those" patents listed by the Panel. (Id., ex.
A at 33-35) Roquette objects to the Award on a number of grounds.
Ill. ANALYSIS
A. Arbitration Proceedings
1. Applicable law
Section 22.3(b) of the JVOA provides in relevant part as follows :
(b) Legal Disputes. Any dispute of a legal nature arising out of or
connected with the interpretation or enforcement of the legal duties, rights
and obligations under this Agreement, including without limitation, its
validity, application (including whether a product is within the Field) or
termination, that cannot be settled by negotiation pursuant to Section 22 .1
or mediation pursuant to Section 22 .2 shall be referred to and finally
resolved by arbitration under the Arbitration Rules of the Center for Public
Resources in New York. The arbitration shall consist of a single arbitrator
mutually agreed by the Parties, or, in the absence of such agreement, the
arbitration shall consist of a panel of three (3) arbitrators who shall
arbitrate the dispute .... Any arbitration shall take place in New York,
New York and any arbitration proceeding shall be conducted according
to the laws of the State of Delaware. Within fifteen (15) days after the
conclusion of the arbitration hearing, the arbitrators shall issue a written
award and statement of decision describing the essential findings and
conclusions on which the award is based , including the calculation of any
5
damages awarded. The arbitrations [sic] shall not be authorized to reform,
modify or materially amend this Agreement or any other agreements
contemplated hereby.
(D.I. 36, ex. Bat 53) Section 23.8 provides that the JVOA "shall be governed and
construed in accordance with the laws of the State of Delaware .... " (Id. at 55)
Roquette maintains that the laws of the State of Delaware control not only the
substantive legal issues (i.e., interpretation of the parties' contract), but the standard of
review relating to the arbitration proceeding itself. Solazyme argues that the arbitration
award should be reviewed under the Federal Arbitration Act, 9 U.S.C. § 1, et seq . As
with most issues, the answer is not incontrovertible.
Although the JVOA makes a distinction between the procedural and substantive
aspects of the agreement, both§ 22.3(b) ("any arbitration proceeding shall be
conducted according to the laws of the State of Delaware") and § 23.8 (the agreement
between the parties "shall be governed and construed in accordance with the laws of
the State of Delaware") refer to Delaware law. (Id. at 53, 55) However, the applicable
Delaware statute itself indicates that the JVOA was not crafted with Delaware law in
mind. More specifically, 10 Del. C. § 5701 provides that "[a] written agreement to
submit to arbitration any controversy existing at or arising after the effective date of the
agreement is valid, enforceable and irrevocable, ... and confers jurisdiction on the
Chancery Court of the State to enforce it and to enter judgment on an award." Section
5702(a) provides that "[t]he making of an agreement described in § 5701 of this title
specifically referencing the Delaware Uniform Arbitration Act [§ 5701 et seq. of
this title] and the parties' desire to have it apply to their agreement confers
6
jurisdiction on" the Court of Chancery of the State of Delaware "to enforce the
agreement." (Emphasis added) Section 5702(c) provides that, "[u]nless an arbitration
agreement complies with the standard set forth in subsection (a) of this section for the
applicability of the Delaware Uniform Arbitration Act, any application to the Court of
Chancery to ... vacate or enforce an arbitrator's award shall be decided by the Court of
Chancery in conformity with the Federal Arbitration Act [9 U.S.C. § 1 et seq.], and
such general principles of law and equity as are not inconsistent with that Act. In
such cases, the other provision of this Delaware Uniform Arbitration Act are
without standing .... " (Emphasis added)
Clearly, the JVOA does not "specifically" reference the Delaware Uniform
Arbitration Act and , indeed , Roquette (the proponent of such) did not file its declaratory
judgment action to vacate the arbitration award in the Court of Chancery, as
contemplated by the Delaware statute. Consistent with Delaware law, then, absent
compliance with § 5702(a) , the Federal Arbitration Act ("the Act") applies pursuant to §
5702(c).
2. Standard of review 3
Under the Act, a court's function in reviewing a commercial arbitration award is
"narrow in the extreme" and is "extremely deferential. " Amalgamated Meat Cutters v.
Cross Bros. Meat Packers, Inc., 518 F.2d 1113, 1121 (3d Cir. 1975); Dluhos v.
Strasberg, 321 F.3d 365, 370 (3d Cir. 2003) . Indeed , the Act's "exclusive regimes for
3
Although Roquette filed motions for summary judgment to grant declaratory
relief (to wit, to vacate the arbitration award), the court looks to the Act rather than Fed.
R. Civ. P. 56 for the appropriate standard of review.
7
the review" of such an award are confined to §§ 10 and 11 of the Act. Hall St. Assocs.,
L.L.C. v. Mattel, Inc., 552 U.S. 576, 590 (2008). This deferential standard of review has
been explained as follows: "[W]hen parties agree to resolve their disputes before an
arbitrator without involving the courts, the courts will enforce the bargains implicit in
such agreements by enforcing arbitration awards absent a reason to doubt the authority
or integrity of the arbitral forum." Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 219
(3d Cir. 2012) (citing Mattel, 552 U.S. at 586). Roquette does not question the integrity
of the Panel. Therefore, the pending motion to vacate must be reviewed pursuant to §
1O(a)(4) of the Act, which provides that an award may be vacated "where the arbitrators
exceeded their powers, or so imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not made." 9 U.S.C. § 1O(a)(4).
The Third Circuit has recognized that an arbitration agreement "may place limits
upon the arbitrator's powers that are enforceable by the courts .... An arbitrator
oversteps these limits, and subjects his award to judicial vacatur under§ 1O(a)(4) .... "
Sutter, 675 F.3d at 219. Put another way,
the task of an arbitrator is to interpret and enforce a contract. When he
makes a good faith attempt to do so, even serious errors of law or fact
will not subject his award to vacatur . ... But when the arbitrator "strays
from interpretation and application of the agreement and effectively
'dispenses his own brand of industrial justice,"' he exceeds his powers
and his award will be unenforceable.
Id. at 220 (quoting Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662,
671 (2010)) . In sum, a court should uphold an arbitration award that "'draws its
essence'" from the contract, because '"the parties have bargained for the arbitrator's
decision, [and] 'it is the abitrator's view of the facts and of the meaning of the contract
8
that they have agreed to accept."' The Major League Umpires Assoc. v. The American
League of Professional Baseball Clubs, 357 F.3d 272, 280 (3d Cir. 2004) (citations
omitted). "'An award may fairly be said to 'draw[ ] its essence from the . . . agreement if
the interpretation can in any rational way be derived from the agreement, viewed in
light of its language, its context, and any other indicia of the parties' intention."' Id.
(citations omitted) (emphasis in original).
The question before the court, therefore, is whether the Panel, in its Award ,
demonstrates "manifest disregard" for the JVOA. "Manifest disregard for the [JVOA] is
established when the [Panel's] award is 'totally unsupported by principles of contract
construction ."' Id. (citations omitted) .
3. Discussion
a. 15-day limit
Roquette argues in connection with its motion for summary judgment filed in the
first declaratory judgment action that the Panel did not have jurisdiction to make the
Award because the Panel violated the 15-day limit to do so under the JVOA. In this
regard, although Roquette does not dispute that it agreed to keep the hearing open until
post-trial briefs were submitted (due on November 3, 2014), Roquette maintains that
keeping the hearing open for receipt of new material to accommodate the Panel's
February 19, 2015 award is violative of the JVOA.
Section 22.3(b) requires the arbitration award to be made within 15 days "after
the conclusion of the arbitration hearing." The Panel , in its Award, spent considerable
9
time justifying the process it embraced, citing to the "CPR Arbitration Rules" 4 to support
its logic: (1) the Panel had the "power to hear and determine challenges to jurisdiction;"
(2) the Panel had the authority to "conduct the arbitration in such manner as it [deemed]
appropriate; (3) the Panel, "in its discretion," could "require the parties to produce
evidence in addition to that initially offered;" and (4) the Panel "shall interpret and apply
these Rules insofar as they relate to the [Panel's] powers and duties." (D.I. 18, ex. A at
6-7, citing CPR Arbitration Rules 8.1, 9.1, 12.3, and 22) According to the Panel, then, it
had the discretion to determine when the hearing was concluded in order to pull the
trigger on the 15-day deadline.
The Third Circuit, following Supreme Court precedent, has held that
'"[p]rocedural questions which grow out of the dispute and bear on its final disposition
are presumptively not for the judge, but for an arbitrator, to decide,' as are 'allegation[s]
of waiver, delay, or a like defense to arbitrability."' Puleo v. Chase Bank USA, N.A., 605
F.3d 172, 179 (3d Cir. 2010) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
79, 84 (2002)). Given the broad language of the CPR Rules, and the deference given
to arbitrators vis a vis the procedure they follow, the court concludes that the Panel's
interpretation of the JVOA's 15-day limit can rationally be derived from "the agreement,
viewed in light of its language, its context, and ... other indicia of the parties' intention."
Major League, 357 F.3d at 280.
b. Cross-motions to confirm/vacate
Roquette offers four reasons to vacate the Award at issue: (1) the Panel
4
The Rules of the Center for Public Resources ("CPR") in New York (now the
International Center for Conflict Prevention & Resolution) .
10
proceeded in manifest disregard of established Delaware law when it considered
extrinsic evidence in connection with an unambiguous contract; (2) the Panel exceeded
its powers when it considered a material transfer agreement rather than confining its
review to the JVOA; (3) the Award violates public policy; and (4) the Panel dispensed its
"own brand of industrial justice." Although somewhat overlapping , the court will address
each in turn .
(1) Review of extrinsic evidence
As described by the Panel , the principal issue in the arbitration was "the
disposition of Intellectual Property owned by SRN upon its dissolution. " (D.I. 18, ex. A
at 21) In resolving that issue, the Panel reviewed the language of the JVOA as it
related to the parties' intellectual property. Specifically, § 21 .1(c) of the JVOA provides
that, "[u]pon dissolution of the Company, the intangible assets of the Company . . . shall
be treated as follows :" 5
(i) all Improvements to the Licensed Intellectual Property licensed to the
Company by Solazyme , and any improvements, enhancements or refinements thereto
made after the Accumulation Termination Date, shall be assigned by the Company to
Solazyme;
(ii) all improvements to the Licensed Intellectual Property licensed to the
Company by Roquette, and any improvements, enhancements or refinements thereto
made after the Accumulation Termination Date, shall be assigned by the Company to
Roquette.
(iii) all other intangible rights owned by the Company shall be assigned by
the Company jointly to Roquette and Solazyme, each of which shall have the right to
use, practice and license such Intellectual Property for any and all uses, without any
accounting to the other.
(D.I. 36, ex. Bat 51) Consistent with the language above , the word "improvements"
5
"[C]apitalized terms used in the Section 21 .1(c) , but not defined in this
Agreement, shall be as defined in the License Agreements." (D.I. 36 , ex. Bat 50)
11
was not a defined term in the JVOA. The Panel , therefore, referred to the definition of
"improvements" found in the parties' respective license agreements:
"Improvements" shall mean any improvements, enhancements,
modifications or refinements, patented or not, to the Licensed Intellectual
Property that are reduced to practice or otherwise developed prior to the
Accumulation Termination Date, by the applicable Party alone or in
collaboration with one or more Third Parties, which are Controlled by the
applicable Party.
(D.I. 36, exs. C and D, § 1.15) In this regard , Roquette argued that it was inappropriate
to look to the definition of Improvements in the Solazyme License Agreement because
it was not specifically mentioned in§ 23.15 of the JVOA. And , indeed , that is the case;
however, the Solazyme License Agreement is virtually identical to the Roquette License
Agreement and both were included as exhibits to the JVOA and referred to on the
signature page of the JVOA. (Id., ex. B at 58 and ex. C)
In connection with § 21.1 (c) of the JVOA, "[e]ach party had an expert who opined
on whether the Intellectual Property it had brought to [SRN] was improved upon. " (D.I.
18, ex. A at 28) The Panel found the expert for Solazyme to be the more persuasive
and credible. (Id.) It is clear to the court that the Panel had to review extrinsic evidence
to resolve this issue and, therefore, finds no reason to vacate on that basis.
(2) Material transfer agreement
Roquette also argues that the Panel exceeded its powers when it referred in the
Award to a certain material transfer agreement ("the MTA"):
As part of the negotiations between the parties, they adopted a Material
Transfer Agreement, dated July 14, 2009. Solazyme agreed to furnish to
Roquette for testing and evaluation certain materials it had developed .
They were the products and processes that Solazyme contributed to the
Joint Venture and are the products and related intellectual property now in
12
dispute; the high lipid algal flour and the high protein algal powder. In the
Agreement, Roquette acknowledged Solazyme's ownership of them and
agreed not to file any patent application directed to the "material"
delivered to Roquette. "In the event that Roquette filed any patent
application in breach of this Section, Roquette further agreed that Solazyme
shall own any such patent application or resulting patent."
(Id., ex. A at 14-15) The MTA was entered into before the parties executed the JVOA
and provides for separate remedies under the laws of the State of New York. (D .I. 81,
ex. 1) Importantly, it is not mentioned in § 23.15 of the JVOA6 and not attached to the
JVOA, as were the other agreements therein mentioned . (D .I. 36, ex. Bat SOLAZYME00143373-76) Nevertheless, the Panel found that Roquette had breached§ 3.3 of the
MTA "and that the so-called shadow patent applications filed by Roquette and all
patents that may be subsequently issued, and the related know-how, now the property
of Roquette, belong to Solazyme and must be assigned by Roquette to Solazyme." (D.I.
18, ex. A at 31)
The court concludes that the Panel did not exceed its authority in reviewing the
6
Section 23.15 provides in relevant part that the JVOA
is being executed in conjunction with the Roquette License Agreement,
the Manufacturing Agreement and the Services Agreement, which, taken
together, collectively represent the entire understanding and agreement
between the Parties with respect to the subject matter of and the
transactions contemplated by this Agreement. The provisions of this
Agreement shall be construed within the four corners of this Agreement;
provided, however, that reasonable efforts shall be made to interpret and
give full force and effect to the provisions of this Agreement in a manner
that is not inconsistent with the interpretation given to the relevant
provisions of the foregoing agreements and that gives full force and
effect to all relevant provision of the foregoing agreements in their
entirety ....
(D.I. 36, ex. Bat 56)
13
MTA in connection with its task of determining whether improvements were made to
Solazyme's intellectual property, pursuant to § 21.1 (c)(i) of the JVOA, as the MTA shed
light on that issue. The court will discuss infra whether the Panel's substantive ruling on
the MTA impacts the confirmability of the Award.
(3) Public policy
As noted above, the Panel concluded that "the improvement to the Intellectual
Property at issue are the property of Solazyme," and "that Roquette is presently
attempting to patent intellectual property in its own name and marketing products that
are based upon intellectual property and products that Solazyme contributed to" SRN.
(D.I. 18, ex. A at 30) Therefore, Solazyme was "entitled to be assigned all of the
improvements SRN made to Solazyme's intellectual property." This general conclusion
is properly within the scope of the Panel's charge under the JVOA. In more specifically
defining what "improvements" were to be assigned, the Panel identified the following:
(1) "[a]ll of the patent applications currently assigned to SRN;" (2) "[a]ll of SRN's knowhow related to the production of the SRN products, including all know-how related to the
production of whole cell microalgal products with" certain enumerated properties; and
(3) "[a]ll Roquette patent applications filed on or after November 3, 2010 relating to
microalgal foods, microalgal food ingredients, and microalgal nutritionals, as well as all
methods relating to making and using the same, including but not limited to those listed"
in several tables attached to the Award. (D.I. 18, ex. A at 33-35)
Roquette challenges the Award as being so broad as to "curtail Roquette's ability
to compete in the manufacture or sale" of all microalgal food products, in effect granting
Solazyme monopoly power in the microalgal food market and violating the public policy
14
against monopolization. (D. I. 53 at 15) Solazyme's response is two-fold : ( 1) there is
no authority which stands for the proposition that a commercial arbitration award may
be vacated on public policy grounds; and (2) the breadth of the relief awarded by the
Panel is due to Roquette's own failure to comply with the discovery ordered by the
Panel; i.e., "[b]ecause Roquette refused to provide any discovery, the Panel was left
with no way to delineate between the patent applications to which Solazyme was
entitled (because they represented improvements to the intellectual property Solazyme
contributed to SRN) and any patent applications that Roquette was entitled to retain."
(D.I. 67 at 13)
There is no case law directly on point. And, indeed, it is not surprising that
Roquette's public policy argument has either not been presented or has not prevailed in
the context at bar, when commercial arbitration awards are reviewed with great
deference and patents constitute exceptions to the general rule against monopolies.
The court declines to create case law out of whole cloth under the circumstances at
bar.
(4) Industrial justice
Roquette's final argument is that, by acting outside the scope of its contractually
delegated authority, the Panel exceeded its authority and dispensed its own brand of
industrial justice. See Newark Morning Ledger Co. v. Newark Typographical Union,
Local 103, 797 F.2d 162, 165 (3d Cir. 1986); Pa. Power Co. v. Local Union #272 of the
Int'/ Bhd. of Elec. Workers, 886 F.2d 46, 49-51 (3d Cir. 1989). Although the court has
concluded that the Panel exceeded its authority by substantively reviewing the MTA
15
and finding a breach thereof, it is not clear whether the Panel exacerbated that conduct
by using the breach as a basis for the broad relief granted to Solazyme, and/or whether
the relief itself is so broad as to be outside the scope contemplated by the JVOA.
The JVOA is a complicated contract, written to accommodate the sharing of
highly confidential, technical information between two potential competitors. In broad
strokes, the JVOA imposed rigorous confidentiality obligations on the parties in § 17 .1 ,
recited in relevant part as follows:
Each Party agrees that, for the Term and for five (5) years thereafter, such
Party shall , and shall ensure that its officers, directors, employees and agents
shall, keep completely confidential .. . and not publish or otherwise disclose
and not use for any purpose except as expressly permitted hereunder any
Confidential Information or materials furnished to it by the other Party
(including, without limitation, know-how of the disclosing Party) . The
foregoing obligations shall not apply to any information disclosed by a
Party hereunder to the extent that the receiving Party can demonstrate
with competent evidence that such information:
(a) was already known to the receiving Party or its
Affiliates, other than under an obligation of confidentiality to the disclosing
Party, at the time of disclosure;
(b) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any
act or omission of the receiving Party in breach of this Agreement;
(d) was subsequently lawfully disclosed to the receiving
Party or its Affiliates by a third party other than in contravention of a
confidentiality obligation of such third party to the disclosing Party; or
(e) was developed or discovered by employees of the
receiving Party or its Affiliates who had no access to the Confidential
Information of the disclosing Party.
(D.I. 36, ex.Bat§ 17.1) (emphasis added) Each party contributed to SRN certain
16
"Licensed Intellectual Property" via the license agreements . (D .I. 36, exs. C and D)
Consistent with the definition of "Intellectual Property" provided in the respective license
agreements, "Licensed Intellectual Property" included, inter alia, patents and know-how.
(See id., ex. Bat SOLAZYME_00143358; ex.Cat§ 1.16, 1.18) "Know-How" was
defined as
any and all information comprising (a) ideas, discoveries, inventions,
improvements or trade secrets, (b) research and development data,
such as biological, dietary, nutritional, analytical or quality control data,
in each case together with supporting documentation, (c) databases,
practices, experience, methods, techniques, specifications, formulations,
formulae , processes, and Manufacturing information, (d) tangible
compositions, e.g ., microalgal strains, and (e) business, marketing and
regulatory data, in each case, that are not generally known or available
to the public as a compilation of information.
(Id., ex. C at§ 1.17) (emphasis added) With respect to each party's "Know-How, " the
license agreements provided that, e,g,, "Solazyme Know-How" shall mean "all KnowHow Controlled by Solazyme on or before the Accumulation Termination Date that is
necessary or useful to the research and development, Manufacture, distribution, sales,
marketing and/or support of Products and corresponding Services in the Field. " (Id. , ex.
Cat§ 1.30)
Although the JVOA is somewhat circular in its language, the goal of the JVOA is
apparent and logical. If a party contributed intellectual property (patents or know-how)
to the joint venture, that party should be the one who benefits from the improvements
thereto if the joint venture was terminated; otherwise, the other party would get a
windfall (not only access to confidential information , but the benefit of improvements to
such). Right or wrong, the Panel determined that (1) "the improvements to the
Intellectual Property at issue are the property of Solazyme, " and (2) § 23.1 (c)(i), not§
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23.1 (c)(iii) (as Roquette argued), was the operative provision of the JVOA upon which
to base the Award. As far as the court can tell from the record, Roquette was given its
bargained-for opportunity to demonstrate that the know-how it used in connection with
its patent applications was its own or publicly available, but failed to participate in this
aspect of the arbitration proceeding. Therefore, although the relief granted in the
Award is broad in scope, the court concludes that the Panel did not exceed its authority
in this regard, nor did the Panel base the Award (to any determined extent) on the
breach of the MTA.
4. Conclusion
Consistent with the above reasoning, the court confirms the Award . More
specifically, the court grants Solazyme's motion for an order to confirm the Award and
denies Roquette's motion for an order to vacate the Award, as well as Roquette's
motions for summary judgment as to its declaratory judgment actions. Judgment shall
be entered accordingly.
8. Misappropriation of Solazyme's Trade Secrets
Which leaves the court with the tangle of motions relating to Solazyme's
counterclaim. The record indicates that Solazyme filed a motion for a preliminary
injunction only because Roquette refused to comply with the Award and continued to
claim it had "ownership rights to the products, manufacturing capacity, and the head
start that manufacturing capacity provides ." (D.I. 27 at 3) Roquette responded with two
motions for summary judgment, one based on Solazyme's "failure to identify trade
secrets" and one based on several interrelated novel theories which cannot be
18
summarized easily. Quite frankly, the court is not confident that these motions are
either necessary (in the case of Solazyme's motion for injunctive relief) or appropriate
(in the case of Roquette's motions), given the court's understanding that the trade
secrets at issue in Solazyme's counterclaim are the same trade secrets ("know-how")
addressed by the Panel in the Award , and the Award has now been confirmed and
judgment entered. As noted above, these parties entered into a contract by which they
agreed to resolve the distribution of SRN's assets (including intangible assets like trade
secrets) through arbitration. Although the court recognizes that Roquette (viewed in the
most charitable light) lost confidence in the arbitration process and stopped
participating as a result, nevertheless, the identification and disposition of such assets
as the parties' respective trade secrets was within the scope of the arbitration and was
addressed (even if addressed incorrectly) .7 The court will not decide these pending
motions until the parties identify what issues, if any, remain for resolution after judgment
is entered on the Award.
IV. CONCLUSION
For the reasons stated, Solazyme's motion for an order confirming the Award
(D.I. 16) is granted, and Roquette's motion for an order vacating the Award (D.I. 52) is
denied, as are its motions for summary judgment relating to the Award (D .I. 43, D.I. 47) .
Because some or all of the remaining motions may be mooted or resolved by the entry
of judgment in favor of Solazyme, the court declines to address the merits of such
7
Again, Roquette apparently did not bring to the arbitration proceeding all of the
evidence and arguments it could have. That, combined with the inherent difficulty of
determining what "know-how" is and by whom and when it was derived, surely made
the "bargained-for" dispute resolution process a complex one to execute.
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motions pending further submissions of the parties . An order shall issue.
20
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