Polyzen, Inc. v. Radiadyne, LLC

Filing 142

ORDER GRANTING IN PART AND DENYING IN PART 108 Motion for Partial Summary Judgment and GRANTING 112 Motion for Partial Summary Judgment. The parties shall submit briefs on the question of specific performance for Polyzen's breach of contra ct according to the court-ordered schedule. Polyzen's claim for misappropriation of trade secrets with respect to the information contained in Note 1 of DIE 279 survives. After the submission of briefs, the parties shall engage in a court-hosted settlement conference with United States Magistrate Judge James E. Gates. Signed by Chief Judge James C. Dever III on 2/18/15. Counsel is reminded to read the order in its entirety for critical deadlines and information. (O'Brien, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:11-CV-662-D

POLYZEN, INC.,
Plaintiff,
v.
RADIADYNE, LLC,
Defendant.

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ORDER

On November 21, 2011, Polyzen, Inc. ("Polyzen" or "defendant"), filed suit in this court
against RadiaDyne, LLC ("RadiaDyne"), alleging patent infringement [D.E. 1]. On December 13,
2011, RadiaDyne filed a motion to dismiss for lack of jurisdiction and to correct ownership of the
patent-in-suit [D.E. 10]. On December 23, 2011, RadiaDyne sued Polyzen in the United States
District Court for the Southern District of Texas, alleging breach of contract and other claims. See
Complaint at 9-13, RadiaDyne LLC v. Polyzen. Inc., No.5: 12-CV-102-D (E.D.N.C. Dec. 23, 2011),
[D.E. 1]. On February 24, 2012, the Southern District of Texas transferred RadiaDyne' s case to this
court. See Order, RadiaDyne LLC v. Polyzen. Inc., No. 5:12-CV-102-D (E.D.N.C. Feb. 24, 2012),
[D.E. 10]. On July 2, 2012, the court consolidated the two cases [D.E. 26]. On September 13, 2012,
. the court denied RadiaDyne's motion to dismiss for lack of jUrisdiction and to correct ownership
[D.E. 30].
On June 4, 2013, RadiaDyne moved for partial summary judgment oninventorshiP, [D.E. 65].
On June 28,2013, Polyzen filed a motion for summary judgment on inventorship [D.E. 72]. On
October 31,2013, the court denied both motions for summary judgment on inventorship [D.E. 88].

On November 4, 2013, Polyzen filed an amended complaint, alleging patent infringement, breach
of contract, and misappropriation of trade secrets [D.E. 89]. On November 18,2013, RadiaDyne
answered and added an additional counterclaim of bad faith trade secret litigation [D.E. 91]. On
December 19,2013, Polyzen answered [D.E. 97].
On May 23, 2014, both parties filed multiple motions for summary judgment. Polyzen
moved for summary judgment on the validity of the patent-in-suit [D.E. 107] and on its patent
infringement claim [D.E. 116]. RadiaDyne moved for partial summary judgment on Polyzen's trade
secret misappropriation claim [D.E. 108] and on its own breach of contract counterclaim [D .E. 112].
On December 12, 2014, the court denied Polyzen's motion for summary judgment on the validity
of its patent [D.E. 141]. As explained below, the court grants RadiaDyne's motion for partial
summary judgment on its breach of contract counterclaim and grants in part RadiaDyne's motion
for partial summary judgment on Polyzen' s trade secret misappropriation claim.

I.
In early 2007, John Isham, founder and president ofRadiaDyne, learned ofPolyzen when
searching the Internet for "medical balloons" and "medical devices." Isham Dep. [D.E. 109-2] 106.
Isham then contacted Polyzen. Id. On February 12, 2007, RadiaDyne and Polyzen began worldng
together to develop a medical balloon device design and the technology and process necessary to
produce it. See Development & Commercialization Agreement ("2008 DCA") [D.E. 109-16] ~ 3.d.
On March 26,2007, Rubin Shah, a Polyzen employee, sent Isham a quote for a project to "Design

& Thermoform/ RF Weld PU Balloon- Phase I." See [D.E. 109-3] 3-4. The quote totaled $23,500,
and it included a price of$4,500 for "design" and a price of$19,000 for prototype production. Id.
Tilak Shah, Polyzen's founder, created the quote. ld. 4; Tilak Shah 30(b)(6) Dep. [D.E. 132-1] 24,
Feb. 26, 2014. On March 28, 2007, RadiaDyne issued a purchase order to Polyzen for a total of

2

$23,500. See [D.E. 109-4] RD 1132. On March 29, 2007, Polyzen sent RadiaDyne its first invoice
and RadiaDyne paid a deposit of $4,500. See [D.E. 109-5] RD 1131; [D.E. 109-6] RD 1136.
On July 27,2007, Polyzen sent a balloon design to Isham, which he approved. See [D.E.
109-7] P 219. On July 31, 2007, Isham sent Rubin Shah an email and told Shah that he wanted to
launch the product at the October 2007 ASTRO trade show. See [D.E. 109-8] RD 2649. Rubin
Shah responded the same day and told Isham that he could meet the deadline despite it being "a very
aggressive timeline." Id.

Isham replied later in the day and asked for information on the

manufacturing process so he could "submit [a] FDA Registration letter." Id.
On September 25, 2007, Polyzen filed a provisional patent application. See Tilak Shah
30(b)(6) Dep. 192. Polyzen did not inform RadiaDyne of the patent application. Cf. id. 192-92;
Tilak Shah Dep. [D.E. 113-11] 89-90, Mar. 15, 2013. Polyzen intended to get the patent application
filed before the balloon was publicly displayed at the October 2007 ASTRO trade show. See Tilak
Shah 30(b)(6) Dep. 228.
On September 26, 2007, Tilak Shah sent Isham quotes for two new phases: Phase II, which
consisted of the production of 100 samples "for testing and trials," and Phase III, which consisted
of full-scale production of the medical balloons. See [D.E. 109-9] 2-7. RadiaDyne completed
purchase orders for both phases. See [D.E. 109-10, 109-11].
On October 9, 2007, Polyzen and RadiaDyne entered into a "Development and
Commercialization Agreement" that assigned different rights and obligations to the two parties. See
2007 DCA [D.E. 122-3]. On February 8, 2008, the parties entered into a new and almost identical
agreement. See 2008 DCA 2. Polyzen drafted the 2008 DCA with the assistance of Willy Man:froy,
an intellectual property licensing specialist. See Tilak Shah 30(b)(6) Dep. 191, 262-64. In the 2008
DCA, ''thepartiesagree[d]thatRADIADYNETECHNOLOGYandRADIADYNEPRODUCTwill

3

remain the properties of RADIADYNE and POLYZEN TECHNOLOGY, DEVICE PROCESS
TECHNOLOGY and BALLOON PROCESS TECHNOLOGY will remain the property of
POLYZEN." 2008 DCA~ 6.a. The 2008 DCA defines "RadiaDyne Product" as "[s]pecific design
of rectal balloon catheter for locating/supporting prostate during radiation therapy with Polyzen's
Balloon Process Technology." ld. ~ 2.e (emphasis omitted). The 2008 DCA defines Polyzen's
Balloon Process Technology as "Polyzen's PU film welded balloon technology, including film
formulation, thickness and multi-layer film welded, designed to articulate desired shape and profile
of balloons for various applications." ld.

~

2.d. The definition and assignment of intellectual

property survive any termination of the 2008 DCA. ld. ~ 7.b.
On March 12, 2008, Isham forwarded to Dielectrics, Inc. ("Dialectrics"), another
manufacturer, the "product specification drawings" for the balloon, which Polyzen had previously
sentto Isham. See [D.E. 109-17] DIE 117-19.
On September 25, 2008, Polyzen filed another patent application for a "Multi-Layer Film
Welded Articulated Balloon." See '497 Patent [D.E. 1-3] 2.
On September 10, 2009, Isham forwarded to Dielectrics another email from Polyzen, which
contained an attachment with an updated balloon design. See [D.E. 109-20] DIE 278-79. In
November 2009, RadiaDyne terminated the 2008 DCA with Polyzen. See Def.'s Answer Am.
Compl. [D.E. 91]

~ 43.

On July 12, 2011, the United States Patent & Trademark Office ("PTO") issued Patent No.
7,976,497 (''the '497 patent"). See '497 Patent 2. The '497 patent listed Tilak Shah and Christopher
Strom as inventors and Polyzen as the assignee. Id. The '497 patent issued with five claims, all
directed to "a medical balloon device." ld. 10.

4

II.
Summary judgment is appropriate if the moving party demonstrates that there is no genuine
dispute as to any material fact and the moving party is entitled to judgment as a matter oflaw. Fed.

R. Civ. P. 56(a). The party seeking summary judgment must initially show an absence of genuine
dispute of material facts or the absence of evidence to support the nonmoving party's case. Celotex
Corp. v. Catrett, 477U.S~ 317,325 (1986). Ifamovingpartymeetsits burden, the nonmoving party
must "come forward with specific facts showing that there is a genuine issue for trial." Matsushita
Elec. Indus. Co. v. Zenith Radio Cotp., 475 U.S. 574,587 (1986) (quotation and emphasis omitted).
A genuine issue for trial exists ifthere is sufficient evidence favoring the nonmoving party for a jury
to return a verdict for that party. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 249 (1986). "The
mere existence of a scintilla of evidence in support of the plaintiffs position [is] insufficient." Id.
at 252; see Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985) ("The nonmoving party, however,
cannot create a genuine issue of material fact through mere speculation or the building of one
inference upon another."). Only factual disputes that might affect the outcome under substantive law
properly preclude summary judgment. Anderson, 477 U.S. at 248. In reviewing the factual record,
the court views the facts in the light most favorable to the nonmoving party and draws reasonable
inferences in that party's favor. Matsushim, 475 U.S. at 587-88.

A.
The court first addresses RadiaDyne's motion for summary judgment on its breach of
contract counterclaim. In the contract, the parties agreed to apply North Carolina law. See 2008
DCA~

8.a. Under North Carolina law, a party alleging breach of contract must prove the existence

of a valid contract and breachofthecontract'sterms. SeeMcLainbv. T.P. Inc., 173 N.C. App. 586,
588, 619 S.E.2d 577, 580 (2005), disc. rev. denied, 360 N.C. 290, 627 S.E.2d 621 (2006); Poor v.
5

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Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000); Jackson v. Carolina Hardwood Co., 120
N.C. App. 870, 871,463 S.E.2d 571, 572 (1995). The parties do not dispute the validity of the 2008
DCA. Rather, they dispute whether Polyzen breached the 2008 DCA.
In interpreting the 2008 DCA, the court "examine[s] the language of the contract itself for
indications of the parties' intent at the moment of execution." State v. Philip Morris USA Inc., 359
N.C. 763, 773, 618 S.E.2d 219, 225 (2005); Briggs v. Am. & Efird Mills. Inc., 251 N.C. 642, 644,
111 S.E.2d 841, 843 (1960). "If the plain language of a contract is clear, the intention of the parties
is inferred from the words of the contract." Phillip Morris USA, 251 N.C. at 773, 618 S.E.2d at 225
(quotation omitted). "Intent is derived not from a particular contractual term but from the contract
as a whole." ld., 618 S.E.2d at 225; see Briggs, 251 N.C. at 644, Ill S.E.2d at 843 ("To ascertain
this intent, the court looks to the language used, the situation of the parties, and objects to be
accomplished."); Jones v. Casstevens, 222 N.C. 411,413-14,23 S.E.2d 303, 305 (1942). If there
is an ambiguity, the court construes the ambiguity against the party who drafted the contract. Chavis
v. S. Life Ins. Co., 318 N.C. 259,262, 347 S.E.2d 425,427 (1986); Cowell v. Gaston Cnty., 190
N.C. App. 743,746,660 S.E.2d915, 918 (2008). Acourtmayinterpretacontractas amatteroflaw
if the dispositive contractual language is unambiguous or if extrinsic evidence in the record is
dispositive of the interpretive issue. World-Wide Rights Ltd. P'ship v. Combe Inc., 955 F.2d 242,
245 (4th Cir. 1992).
RadiaDyne argues that Polyzen breached the 2008 DCA because (1) Polyzen' s act of filing
for and receiving the '497 patent constituted an act of ownership over the design of the medical
balloon device; and (2) the 2008 DCA gave ownership of the design of the medical balloon device
to RadiaDyne and not to Polyzen. See Def.' s Mem. Supp. Mot. Partial Summ. J. Breach of Contract
[D.E. 113] 1, 6-11. The court addresses each argument in turn.

6

First, the act of filing a patent does not, in and of itself, exert ownership of the claimed
invention. Federal law requires that the patent list only and all of the true inventors-misjoinder or
nonjoinder voids the patent. See,~' 35 U.S.C. §§ 111(a), 115(b)(2); Iowa State Univ. Research
Found.. Inc. v. Speny Rand Corp., 444 F .2d 406, 408-10 (4th Cir. 1971) (noting that a patent is void
if it lists more or less than all the true inventors). Polyzen' s application for the '497 patent does not
necessarily conflict with RadiaDyne' s potential ownership interest in the patent. Rather, the relevant
question is the identity of the assignee of the title and rights to the '497 patent. See,~' Levin v.
Septodont. Inc., 34 F. App'x 65, 67 (4th Cir. 2002) (unpublished) (noting that the assignee is ''the
record owner" of the patent); Minco. Inc. v. Combustion Eng' g. Inc., 95 F.3d 1109, 1116 (Fed. Cir.
1996) ("An assignment of patent rights operates to transfer title to the patent[.]"); Diamond lnt'l
Corp. v. Md. Fresh Eggs. Inc., 523 F.2d 113, 114 (4th Cir. 1975) (noting that the assignee is the
owner of a patent); Am. Monorail Co. v. Parks-Cramer Co., 245 F.2d 739, 739 (4th Cir. 1957)
(same).
Polyzen is the sole assignee of the '497 patent. See '497 Patent 2. Thus, Polyzen owns the
'497 patent and the claims made therein for a medical balloon device.
Next, the court considers whether Polyzen's ownership of the '497 patent constitutes a
breach ofthe 2008 DCA. The 2008 DCA assigns to RadiaDyne the so-called "RadiaDyne Product,"
or the "[s]pecific design of rectal balloon catheter for locating/supporting prostate during radiation
therapy with Polyzen's Balloon Process Technology." 2008 DCA~~ 2.e, 6.a (original emphasis
omitted and emphasis added). "Design" means, among other definitions, "a preliminary sketch or
outline . . . showing the main features of something to be executed," or ''the drawing up of
specifications as to structure, forms, positions, materials ... in the form of a layout for setting up,
building, or fabrication." Webster's Third New International Dictionary 611-12 (1993). The
7

Balloon Process Technology, which paragraph 2.e of the 2008 DCA expressly incorporates into the
RadiaDyne Product, includes "Polyzen' s PU film welded balloon technology . . . designed to
articulate desired shape and profile ofballoons for various applications." ld. ~ 2.d. The 2008 DCA
assigns to Polyzen the Device Process Technology, which"[m ]eans the device design development,
fabrication processes, material specifications, testing procedures and documentation developed by
Polyzen to manufacture specific product for RadiaDyne ...." ld. ~~ 2.c, 6.a. 1
Here, the dispute turns on whether the claims of the '497 patent are directed to the specific
design ofthe medical balloon, incorporating Polyzen' s Balloon Process Technology, or to the Device
Process Technology that includes "device design development, fabrication processes, [and] material
specifications." See, ~' Markman v. Westview Instruments. Inc., 517 U.S. 370, 373 (1996)
(explaining that "[t]he claim defines the scope of a patent grant" (quotation omitted)); Phillips v.
A WH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en bane) ("It is a bedrockprincipleofpatentlaw
that the claims of a patent define the invention to which the patentee is entitled the right to exclude."
(quotation omitted)); Vitronics Corp. v. Conceptronic. Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)
("[W]e look to the words of the claims themselves . . . to defme the scope of the patented
invention."); Markman v. Westview Instruments. Inc., 52 F.3d 967, 980 (Fed. Cir. 1995) ("The
written description part of the specification itself does not delimit the right to exclude. That is the
function and purpose of claims."), aff d, 517 U.S. 370 (1996). 2 The '497 patent has one independent

1

A process can be "a particular method or system of doing something, producing something,
or accomplishing a specific result," or "a particular method or system used in a manufacturing
operation or other technical operation." Webster's Third New International Dictionary 1808 (1993).
2

To the extent Polyzen relies on the assignment to itself in paragraph 2.b of Polyzen
Technology, including "patents [and] patent applications," as encompassing the '497 patent, the
court rejects the argument. The assignment to Polyzen of patents and patent applications is limited
to those that "relat[e] to production of various components and/or finished devices ...." 2008 DCA

8

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-

-----

claim and four dependent claims. See '497 Patent 10. Each claim begins with a preamble of a
"medical balloon device." Id. Claim one, the independent claim, describes the balloon device as
comprising three thermoplastic film layers with specific joined edges and an opening in the bottom
layer that permits fluid communication between the bottom and top layers. Id.3 Claim two, a
dependent claim, includes the further limitation ''wherein the second and third layers are secured
intermediate said second and third edges so that the distal portion of the third layer bulges upwardly
upon inflation." Id. The remaining dependent claims contain additional, qualitatively-similar
limitations. See id.
The claims are directed to the specific design of the medical balloon device and, therefore,
fall within the definition of RadiaDyne Product.

Claim one, for example, describes the

~

2.b (emphasis added). Paragraph 2.e assigns the specific design of the rectal balloon catheter to
RadiaDyne. Thus, the court interprets paragraph 2.b as covering patents and patent applications
concerning production processes. See Bolton Cor,p. v. T.A. Loving Co., 317 N.C. 623, 628, 347
S.E.2d 369, 372 (1986) ("All parts of a contract are to be given effect if possible. It is presumed that
each part of the contract means something.").
3

Specifically, claim one states:

A medical balloon device, comprising:
a first thermoplastic film layer comprising a first material, wherein the first layer
includes a first edge;
a second thermoplastic film layer comprising a second material, wherein the second
layer includes a second edge joined to the first edge to form a bottom inflatable
compartment between the first and second layer;
a third thermoplastic film layer including proximal and distal portions and
comprising a third material different from the first and second materials wherein the
third layer includes a third edge joined to the second edge to form a top inflatable
compartment between the second and third layer; and
an opening in said bottom inflatable compartment to receive a lumen, wherein the
bottom inflatable compartment is in fluid communication with the top inflatable
compartment.
'497 Patent 10.

9

"specifications as to structure ... positions, materials" for "building, or fabricat[ing]" the medical
balloon. Cf. Webster's Third New International Dictionary 611-12 (1993) (definition of"design").
The claim is not directed to the process for fabricating the balloons, such as how the materials
constituting the three layers are to be constructed, cut, or joined together. Rather, claim one explains
the design for integrating the necessary constituent part, such as the fact that they are joined together
on specific edges to form inflatable compartments. Thus, the '497 patent is a product patent, not a
process patent. Cf. 35 U.S.C. §§ 101, 100(b) (defming "process" as "process, art, or method"); see
Holland Furniture Co. v. Perkins Glue Co., 277 U.S. 245, 254 (1928) (acknowledging that product
patents are different from process patents and that "[t]he former, if sufficiently described, may exist
and be sustained independently ofthe latter"). Although some summary language in the patent states
that the patent is "a method of fabrication," see '497 Patent 2, 9, the actual claims of the patent show
otherwise. See Markm;m, 52 F.3d at 980 (the patent claims, not the specification, define the scope
of the patent). Moreover, to the extent, if any, that one or more of the claims implicate Polyzen' s
Balloon Process Technology, the 2008 DCA incorporates the Balloon Process Technology into the
specific design of the rectal balloon catheter. Accordingly, the plain language of the 2008 DCA
instructs that the '497 patent, as RadiaDyne product, ''will remain the propert[y] ofRadiaDyne."
2008 DCA~ 6.a; Atl. Marine Corps Cmtys. LLC v. Onslow Cnty.. N.C., 497 F. Supp. 2d 743,
756-57 (E.D.N.C. 2007) (equating "shall remain the property of' with ownership).
Polyzen makes several arguments in opposition to this conclusion. First, and in response to
RadiaDyne' s theory of breach, Polyzen argues that the filing a patent did not breach the 2008 DCA.
See Pl.'s Resp. in Opp'n Def.'s Mot. Partial Summ. J. Breach of Contract [D.E. 121] 6-7. As
discussed, Polyzen is correct. The mere act of filing a patent did not breach the 2008 DCA. Rather,
it was Polyzen' s act of assigning to itself, via its employees, the rights to the '497 patent that
10

breached the 2008 DCA.
Second, Polyzen contends that RadiaDyne's property interest in the '497 patent, whatever
it may be, is not an ownership interest. See Pl.'s Resp. in Opp'n Def.'s Mot. Partial Summ. J.
Breach of Contract 7-10. Polyzen's argument, however, rests on the faulty premise, drawn from
paragraph 6.d of the 2008 DCA, that RadiaDyne' s rights to the RadiaDyne Product are an exclusive
license and not outright ownership. See id. 8-9; 2008 DCA, 6.d.
Paragraph 6.d. cannot bear the weight that Polyzen assigns to it. Paragraph 6.d defines a
process by which RadiaDyne may receive a nonexclusive license to Polyzen' s intellectual property
(specifically, the Device Process Technology and the Balloon Process Technology) in order to use
that intellectual property to produce the RadiaDyne Product through a different manufacturer. See
2008 DCA, 6.d (stating that if "RadiaDyne decides to use another manufacturer for RadiaDyne
product, using Polyzen's IP, Polyzen agrees to grant non-exclusive license to make and have made
to RadiaDyne" Polyzen' s specified intellectual property (emphasis added)). Paragraph 6.d does not
limit RadiaDyne's ownership interest of the RadiaDyne Product, which, as discussed, includes the
'497 patent. Rather, paragraph 6.d permits RadiaDyne to gain a nonexclusive license to Polyzen's
intellectual property ifRadiaDyne wanted a third-party manufacturer to use that intellectual property
because of Polyzen's inability or unwillingness to meet RadiaDyne's commercial needs.
Furthermore, paragraph 6.d applies only ifPolyzen and RadiaDyne "enter[] into a manufacturing and
supply agreement, and . . . Polyzen is unable or unwilling to supply RadiaDyne its volume
requirements at a reasonable transfer price ...." ld. The record shows that Polyzen and RadiaDyne
did not enter into a manufacturing and supply agreement, thus obviating the application of paragraph
6.d. See Tilak Shah 30(b)(6) Dep. 42-44.
Third, Polyzen asserts that the '497 patent is Polyzen' s intellectual property. See Pl.'s Resp.
11

in Opp 'n Def.'s Mot. Partial Summ. J. Breach of Contract 1. As discussed, however, the '497 patent
falls under the definition ofthe RadiaDyne Product that the 2008 DCA assigns to RadiaDyne. Thus,
this argument fails.
Fourth, Polyzen asserts that the RadiaDyne Product assigned to RadiaDyne only covers a
single balloon shape. See, ~'Pl.'s Resp. in Opp'n Def.' s Mot. Partial Summ. J. Breach of Contract
2, 4, 6, 8. This assertion finds no support in the 2008 DCA. The definition ofRadiaDyne Product,
which Polyzen drafted, is the "specific design of [the] rectal balloon catheter ...." 2008 DCA~ 2.e
(original emphasis omitted and emphasis added). As the definition of"design" makes clear, design
means more than a single balloon shape. The only reference to "shape" in the 2008 DCA arises in
the definition of Balloon Process Technology, which is assigned to Polyzen. 2008 DCA~~ 2.d, 6.a
(defining this technology as "Polyzen' s PU film welded balloon technology ... designed to articulate
desired shape and profile of balloons for various applications.").
Finally, Polyzen mentions, without argument, a lack of specified damages. See Pl.'s Resp.
in Opp'n Def.'s Mot. Partial Summ. J. Breach of Contract 11. A party may prevail on breach of
contract and recover nominal damages only.

See,~' United States v. D'Elegance Mgmt. Ltd., 217

F.3d 843, 2000 WL 966034, at *5 (4th Cir. 2000) (per curiam) (unpublished table opinion); Robbins
v. C.W. Myers Trading Post, Inc., 251 N.C. 663, 666, 111 S.E.2d 884, 886 (1960); Turner v. Ellis,
179 N.C. App. 357, 363, 633 S.E.2d 883, 887-88 (2006). Thus, this argument fails.
In sum, the court grants RadiaDyne' s motion for summary judgment on its breach of contract
claim. RadiaDyne requests as remedy the transfer ofPolyzen' s interest in the '497 patent and related
patents to RadiaDyne, as the 2008 DCA contemplates. See Complaint at 11, RadiaDyne. LLC v.
Polyzen. Inc., No. 5:12-CV-102-D (E.D.N.C. Dec. 23, 2011), [D.E. 1]; Def.'s Mem. Supp. Mot.
Partial Summ. J. Breach of Contract 11-12. Under North Carolina law, "[s]pecific performance is
12

I

,---------------------------

available to a party only if that party has alleged and proven that he has performed his obligations
under the contract and that his remedy at law is inadequate." Cavenaugh v. Cavenaugh, 317 N.C.
652,656-57, 347 S.E.2d 19,22 (1986); Whalehead Props. v. Coastland Corp., 299 N.C. 270,282,
261 S.E.2d 899, 907 (1980). At present, RadiaDyne has not proven that a remedy at law is
inadequate. The parties shall brief the court on whether there is an adequate remedy at law for
Polyzen's breach of the 2008 DCA. The parties shall file their briefs no later than March 6, 2015.
Responses are due March 16,2015. There shall be no replies.

B.
The court next addresses RadiaDyne's motion for partial summary judgment on Polyzen's
trade secret misappropriation claim. To establish a prima facie case of misappropriation, Polyzen
must show that RadiaDyne (1) knew or should have known of the trade secret; and (2) had a specific
opportunity to acquire it for disclosure or use, or has acquired, disclosed, or used it without the
express or implied consent or authority of the owner. N.C. Gen. Stat. § 66-155; GE Betz. Inc. v.
Conrad, 752 S.E.2d 634, 649 (N.C. Ct. App. 2013). 4 A plaintiff must allege a trade secret ''with
sufficient particularity . . . to enable a defendant to delineate that which he is accused of
misappropriating and to allow a court to decide whether misappropriation has occurred." GE Betz,
752 S.E.2d at 649 (quotation omitted). "Once a plaintiff establishes a prima facie case, the burden
shifts to the defendant to rebut a presumption that the trade secrets were misappropriated." ld.
Viewing the evidence in the light most favorable to Polyzen, RadiaDyne disclosed to

4

The Supreme Court ofNorth Carolina has not interpreted sections 66-152 or 66-155. In
construing North Carolina law, the court must, absent "definitive authority from North Carolina's
highest court, attempt to divine what that court would do were it faced with this [claim]." Teague
v. Bakker, 35 F.3d 978, 991 (4th Cir. 1994). In doing so, the court may consider cases from the
North Carolina Court of Appeals, treatises, and the practices of other states. See Twin Ciey Fire Ins.
Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th Cir. 2005).
13

Die~ectrics,

a third-party manufacturer, four documents that each contain information about the

medical balloon. See [D.E. 109-17] DIE 117-19 (email from Isham to Dielectrics with an attached
Polyzendocument); [D.E. 109-19] DIE276-77 (two Polyzendocuments); Def.'s Mem. Supp. Mot.
Partial Summ. J. Trade Secret [D.E. 109] 7-8 (admittingthatlsham sent DIE 276-77 to Dielectrics);
[D.E. 109-20] DIE 278-79 (email from Isham to Dielectrics with an attached Polyzen document);
Pl.'s Resp. in Opp'nDef.'s Mot. Partial Summ. J. Trade Secret [D.E. 122] 4-5 (allegingthatlsham
disclosed these four documents to Dielectrics). Three ofthese documents, however, are RadiaDyne
Product. The drawings detailed on DIE 119, DIE 276, and DIE 277 all concern the specific design
of the rectal balloon catheter. For example, DIE 119, which Polyzen claims is a trade secret, is titled
"RB 100 Balloon Device Assembly" and shows the design, including measurements, of the medical
balloon and its associated catheter tubing. See [D.E. 109-17] DIE 119. The document also lists
"Device Requirements," which describe the design of the medical balloon and associated catheter
parts. See id. Moreover, DIE 276 and DIE 277 show similar information. The 2008 DCA makes
RadiaDyne the owner of these three documents because they depict only the "specific design of [the]
rectal balloon catheter." 2008 DCA~~ 2.e, 6.a. As the owner, RadiaDyne could not misappropriate
these documents. See N.C. Gen. Stat. § 66-152(1); GE Betz, 752 S.E.2d at 649-50 (noting that
misappropriation requires disclosure ''without the express or implied consent or authority of the
owner."). Thus, the court grants summary judgment to RadiaDyne on Polyzen's misappropriation
claim concerning the disclosure of DIE 119, DIE 276, and DIE 277.
As for DIE 279, Isham sent DIE 279 to Dielectrics on September 10, 2009. See [D.E. 10920] 2-3. Although DIE 279 shows, in part, design specifications for the "RB 100 Flat Balloon" that
fall within the definition ofRadiaDyne Product, it also contains specifications in Note 1 that define
the depth of the three layers and, crucially, the apparent materials for each layer. [D.E. 109-20] DIE
14

279; see Tilak Shah Dep. 307 (stating that "it's a trade secret to show how we can make a balloon
by not using three different material[s]. We can change the same modulus of elasticity by changing
different thickness, we can create the balloon.").

The 2008 DCA defines Device Process

Technology, which it assigns to Polyzen, in part as "material specifications ... to manufacture
specific product for RadiaDyne." 2008 DCA~ 2.c. Viewing the record in the light most favorable
to Polyzen, there is a genuine issue of material fact concerning whether RadiaDyne owned all of the
information on DIE 279. 5

In response, RadiaDyne contends that, assuming RadiaDyne did not own the documents it
sent to Dielectrics, DIE 279 does not constitute a trade secret because there is no evidence that it has
any commercial value. See Def.'s Mem. Supp. Mot. Partial Summ. J. Trade Secret 22-23; Tilak
Shah Dep. 307 (acknowledging that Polyzen knows of no financial harm to itself from RadiaDyne's
disclosure of DIE 279). Under North Carolina law, a trade secret
means business or technical information, including but not limited to a formula,
pattern, program, device, compilation of information, method, technique, or process
that:

'
I

i

a. Derives independent actual or potential commercial value from not being generally
known or readily ascertainable through independent development or reverse
engineering by persons who can obtain economic value from its disclosure or use;
and
b. Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
N.C. Gen. Stat.§ 66-152(3). That a document is stamped "confidential" does not make it a trade

s RadiaDyne also cites invoices and purchase orders that reference the design of the rectal
balloon catheter as proof of ownership. See Def.' s Mem. Supp. Mot. Partial Summ. J. Trade Secret
19-20. The 2008 DCA, however, is an integrated agreement that expressly "supersedes all prior or
contemporaneous understandings or agreements ... between the parties with respect to such subject
matter." 2008 DCA~ 8.f. Thus, the 2008 DCA's provisions control the assignment of intellectual
property.
15

secret.

See,~'

Glaxo Inc. v. Novopharm Ltd., 931 F. Supp. 1280, 1302 n.23 (E.D.N.C. 1996).

In determining whether the specifications listed under Note 1 on DIE 279 are a trade secret
under North Carolina law, the court considers six factors:
(1) the extent to which information is known outside the business; (2) the extent to
which it is known to employees and others involved in the business; (3) the extent
of measures taken to guard secrecy of the information; (4) the value of information
to business and its competitors; (5) the amount of effort or money expended in
developing the information; and (6) the ease or difficulty with which the information
could properly be acquired or duplicated by others.
Byrd's Lawn & Landscaping. Inc. v. Smith, 142 N.C. App. 371, 375, 542 S.E.2d 689, 692 (2001);
see State ex rei. Utils. Comm'n v. MCI Telecomms. Corp., 132 N.C. App. 625, 634, 514 S.E.2d 276,
282 (1999); Wilmington Star-News. Inc. v. New Hanover Reg'l Med. Ctr.. Inc., 125 N.C. App. 174,
180-81, 480 S.E.2d 53, 56 (1997). The court preliminarily notes that, within the statutory scheme,
the first three factors generally relate to the second prong ofthe definition of a trade secret, see N.C.
Gen. Stat. § 66-152(3 )(b), and the last three factors generally relate to the first prong. SeeN.C. Gen.
Stat. § 66-152(3)(a). A party seeking to establish a trade secret must meet both prongs. See N.C.
Gen. Stat. § 66-152(3).
As for the first two factors, the evidence is unclear to what extent people inside and outside
Polyzen knew about the use of the same material to create the three-layer balloon design. As for the
third factor, the extent of measures taken to guard secrecy, Polyzen and RadiaDyne signed the 2008
DCA that assigned intellectual property rights and also had signed an earlier confidentiality
agreement. See 2008

DCA~

3.c; Tilak Shah 30(b)(6) Dep. 228, 249. There is a genuine issue of

material fact as to whether Note 1 was the subject of efforts to maintain its secrecy.
As for the fourth factor, Polyzen has presented no competent evidence on the value ofNote
1 to itself and its competitors. Polyzen argues that DIE 279 has value because it "represent[s] the

16

culmination of an iterative process taking months of work to come up with a particular method of
fabricating medical balloons that will take any number of desired shapes." Pl.'s Resp. in Opp'n
Def. 's Mot. Partial Summ. J. Trade Secret 11. Polyzen, however, cites no evidence to support this
assertion and attorney arguments are not evidence. See Fed. R. Civ. P. 56(c)(1), (2); IA Labs CA.
LLC v. Nintendo Co., 863 F. Supp. 2d 430, 454 (D. Md. 2012); Wootton Enters .. Inc. v. Subaru of

Am.. Inc., 134 F. Supp. 2d 698, 711 (D. Md. 2001). The only potentially relevant evidence the
parties have cited is Tilak Shah's testimony that "Dielectrics may use [DIE 279] someplace else to
their benefit and RadiaDyne's benefit." Tilak Shah Dep. 307. This conclusory testimony, which
does not address the value of Note 1, is insufficient to cause this factor to weigh in favor of a trade
secret.
As for the fifth factor, Polyzen initially quoted to RadiaDyne a total design cost of $4,500
and production cost of $19,000 to produce the balloon. See [D.E. 109-3] 4. Polyzen's quote for
Phase II and Phase ill did not itemize any costs for the design of the balloon but it totaled $46,800.
See [D.E. 109-9] 5-7. Viewing the evidence in the light most favorable to Polyzen, ajurycouldfind
that Polyzen exerted sufficient effort or spent sufficient money to develop the information contained
in Note 1 to create commercial value from the information not being generally known.
As for the sixth factor, Polyzen has not shown evidence on the ease or difficulty with which
others could acquire or duplicate the information that the medical balloon could be constructed with
three layers of the same material.
Viewing all six factors in the light most favorable to Polyzen, there is a genuine issue of
material fact as to whether Note 1 constituted a trade secret, and summary judgment is inappropriate
concerning Isham's disclosure of DIE 279 to Dielectrics. Accordingly, the court grants in part and
denies in part RadiaDyne's motion for partial summary judgment on Polyzen's trade secret
17

misappropriation claim.
III.
In sum, the court GRANTS RadiaDyne's motion for partial summary judgment on its
breach of contract claim [D.E. 112]. The parties shall submit briefs on the question of specific
performance for Polyzen's breach of contract no later than March 6, 2015. Any responses are due
March 16, 2015. There shall be no replies. Furthermore, the court GRANTS IN PART and DENIES
IN PART RadiaDyne's motion for partial summary judgment on Polyzen's trade secret
misappropriation claim [D.E. 108]. Polyzen's claim for misappropriation of trade secrets with
respect to the information contained in Note 1 of DIE 279 survives. Finally, after the submission
of the briefs, the parties shall engage in a court-hosted settlement conference with United States
Magistrate Judge James E. Gates.
SO ORDERED. This aS day of February 2015.

S C. DEVER III
J
Chief United States District Judge

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