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AgroFresh Inc. v. Mirtech, Inc.

United States District Court, D. Delaware

June 30, 2017

AGROFRESH INC., Plaintiff,
v.
MIRTECH, INC., NAZIR MIR, ESSENTIV LLC, DECCO U.S. POSTHARVEST, INC. and CEREXAGRI d/b/a DECCO POST-HARVEST, Defendants.

          Chad S.C. Stover, Esquire and Regina S.E. Murphy, Esquire of Barnes & Thornburg LLP, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Robert D. MacGill, Esquire, Joseph T. Wendt, Esquire, Deborah Pollack-Milgate, Esquire, and Jessica M. Lindemann, Esquire of Barnes & Thornburg LLP.

          Arthur G. Connolly, III, Esquire and Ryan P. Newell, Esquire of Connolly Gallagher LLP, Wilmington, Delaware. Counsel for Defendants Nazir Mir and Mirtech, Inc. Of Counsel: Eric Dorkin, Esquire, Giel Stein, Esquire, and Mason Floyd, Esquire of Clark Hill PLC.

          Frederick L. Cottrell, III, Esquire of Richards, Layton & Finger, P.A., Wilmington, Delaware. Counsel for Defendants Decco U.S. Post-Harvest, Inc., Cerexagri, Inc. and Essentiv, LLC. Of Counsel: John M. Williamson, Esquire, Parmanand K. Sharma, and Rajeev Gupta, Esquire of Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.

          OPINION

          ROBINSON, Senior District Judge.

         I. INTRODUCTION

         On August 3, 2016, plaintiff AgroFresh Inc. ("AgroFresh" or "plaintiff") filed a complaint against multiple defendants, including Dr. Nazir Mir ("Dr. Mir"), MirTech, Inc. ("MirTech"), Decco U.S. Post-Harvest, Inc. ("Decco"), Essentiv LLC, and Cerexagri, Inc., d/b/a Decco Post-Harvest (collectively, "defendants"). The complaint arises out of a failed business relationship between AgroFresh and MirTech, and includes claims of ownership of certain intellectual property, breach of contract, tortious conduct, and patent infringement. More specifically, count I of the complaint revolves around the agreements between AgroFresh and MirTech, and whether MirTech was obligated to disclose and automatically assign to AgroFresh the rights to U.S. Patent No. 9, 394, 216 ("the '216 patent"), which patent was developed and filed by MirTech. Count IV of the complaint includes allegations that Dr. Mir and MirTech fraudulently induced AgroFresh to sign an extension to the parties' agreements in October 2015.

         In October 2016, the parties filed a joint motion to bifurcate counts I and IV of the complaint on the grounds that prioritizing the claim of ownership of the '216 patent and the fraudulent inducement claim (two of the nineteen counts included in the complaint) would simplify and clarify the disputed issues in the case, likely facilitate resolution, and result in economies for the court and the parties. (D.I. 18) The court granted the motion, and held a bench trial on counts I and IV from March 20 to March 22, 2017. The court has jurisdiction over the matters tried pursuant to 28 U.S.C. §§ 1331, 1337, and 1338(a). Having considered the documentary evidence and testimony, the court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).

         II. FINDINGS OF FACT

         A. The Parties

         Plaintiff AgroFresh is a corporation organized under the laws of the State of Illinois having a principal place of business in Philadelphia, Pennsylvania. AgroFresh is a research-based industry leader in research, development, and sales of technology for pre- and post-harvest freshness preservation of fruits, vegetables, and other produce.

         Defendant MirTech is a corporation organized under the laws of the State of New Jersey, with its principal place of business in Somerset, New Jersey. Dr. Mir is the sole owner of MirTech, signed the contracts at issue on MirTech's behalf, and performed the work contemplated by the contracts at issue.

         Defendant Decco is a Delaware corporation with a principal place of business in Monrovia, California. Defendant Cerexagri d/b/a Decco Post-Harvest is a Pennsylvania corporation with a principal place of business in King of Prussia, Pennsylvania. Essentive LLC is a Delaware limited liability company constituting a joint venture of defendants MirTech and Decco.

         Prior to their business relationship, both AgroFresh and Dr. Mir worked on 1-MCP[1] applications for various crops. (D.I. 94 at 61-64, D.I. 96 at 610) 1-MCP is a synthetic, volatile gas that slows the ripening process in fruits and vegetables. Due to its volatility, commercialization of 1-MCP requires an effective delivery system, which consists of 1-MCP-stabilizing technology and formulations for commercial delivery of 1- MCP to crops. AgroFresh primarily uses an a-cyclodextrin complex to stabilize 1-MCP. 1-MCP is the "foundational molecule for the AgroFresh business, " and AgroFresh's patents and know-how on stabilization technology are a key part of its competitive advantage. (D.I. 94 at 61-68, 71, 178-180)

         Dr. Mir is widely recognized as an inventor and expert in the field of post-harvest technology. (D.I. 96 at 606) In addition to his work on 1-MCP applications for crops, Dr. Mir has developed "1-MCP related technologies" (D.I. 92 at 2), including an invention that combines 1-MCP with an engineered film called a Modified Atmospheric Package ("MAP"). (D.I. 96 at 611)

         B. The Negotiations

         In late 2009, AgroFresh[2] and Dr. Mir (on behalf of MirTech) began negotiations to develop technology combining AgroFresh's 1-MCP expertise[3] and Mir's MAP technology. (See PTX 134; PTX 135; PTX 136) As the parties worked toward a commercial agreement, Dr. Mir indicated that he was willing "to leave everything (namely PenTech, FreshTech, etc.) behind and dedicate all of my efforts to make our partnership a great success." (PTX 136)

         The parties entered an interim Consulting Services Agreement ("CSA") with an effective date of January 1, 2010. The CSA described the services and the field at issue as follows:

Research and development of current and new combination technology, including the development of new intellectual property, comprised of modified atmospheric packaging ("MAP") including microperforated flexible film bags, pouches, rollstock and lidstock, perforation design, etc. and ethylene inhibitors including, but not limited to, 1-methylcyclopropene and its analogs and homologs ("1-MCP") for use on bananas and other produce. New products developed using these combined technologies are "Product" or "Products."

(DTX 22) (emphasis added) Rather than standard Dow language regarding ownership of intellectual property, [4] Dr. Mir insisted that the CSA allow each party to own "any and all inventions conceived or reduced to practice in the course of Services made solely by that Party. The Parties shall jointly own, as of the date of their conception, any and all inventions conceived or reduced to practice jointly by the Parties in the course of Services. [Nevertheless, ] Consultant must disclose those inventions promptly to [Dow's] Representative in writing." (Id.) (emphasis added) During the course of the negotiations, Dow/AgroFresh shared with Dr. Mir the prospect of using different 1-MCP delivery systems in the combination product. (PTX 230, "MAP Chemistry (1 MCP, etc.)")

         C. The Agreements

         The parties signed the formal agreements - a Commercial Agreement and a Consulting Agreement (collectively, the "Agreements")[5] - at issue in this litigation in May 2011, with a retroactive effective date of January 1, 2011. (PTX 82; PTX 83) The following sections are the most relevant to the dispute at bar:

2.2 Services shall include, but not be limited to, research, development, marketing and sales services related to technology combining (i) modified atmosphere packaging comprising one or more microperforated film(s) ("MAP") and (ii) compounds which inhibit the ethylene response in plants including, but not limited to, 1-methylcyclopropene and its analogs and homologs (collectively, "1-MCP"). At all times during the Term, ... Dr. Mir shall be actively engaged in providing the Services; be readily available by telephone or in person; be responsive to requests from AF and its Affiliates; and provide the Services to AF and its Affiliates.
3.2 In further consideration of the compensation paid to MirTech by AF under this Agreement, MirTech agrees to assign, and hereby assigns, to AF, at no additional cost to AF, any and all proprietary interests and rights, for all countries, that MirTech may have under U.S. Patent Application No. 61/284899, and its foreign equivalents, or any other patent application or associated issued patent related to the Products of which Dr. Mir is listed as a co-inventor (the "Patent"). . . .
8.1 Unless otherwise agreed to in a writing signed by the authorized representatives of both parties and attached to this Agreement as an amendment, during the Term of this Agreement and for a period of two (2) years following termination for cause or expiration of this Agreement: (1) MirTech agrees, and MirTech agrees to commit its employees in writing, to not work in any capacity that AF or its Affiliates deem detrimental to the development of the Product and (2) MirTech agrees, and MirTech agrees to commit its employees in writing, to not enter into any future relationship which may adversely impact the development or sale of the Product, or conflict with the Services.
12.1 During the Term of this Agreement, MirTech shall promptly inform AF of any and all inventions, discoveries, improvements or other modifications which are related to the Products ("Improvements"), whether patentable or not. In further consideration of the compensation paid to MirTech by AF under this Agreement, MirTech hereby assigns automatically all rights, and all future rights, to AF, at no additional cost to AF, any and all proprietary interests and rights, for all countries, in the Improvements, including, without limitation, any patent rights, know-how, copyrights, or other intellectual property. MirTech shall execute any documents necessary to accomplish such assignment.

(PTX 82) (emphasis added) Attached to the Agreements was a "Description of Services, " which provides in relevant part as follows:

During the Term, MirTech shall appoint Dr. Nazir Mir to act as a consultant to AF and its Affiliates and Dr. Mir, together with such assistants as MirTech shall require, and whom MirTech shall employ at its own expense, shall provide the following services, and other services as identified by AF or its Affiliates:
1. Ongoing research and development of current and new combination technology, including development of new intellectual property, combining (i) modified atmosphere packaging comprising one or more microperforated film(s) ("MAP") and (ii) compounds which inhibit the ethylene response in plants including, but not limited to, 1-methylcyclopropene and its analogs and homologs (collectively, "1-MCP"), for use on bananas and other produce. Products developed using these combined technologies are "Product" or "Products" under this Agreement. Other plants and/or plant parts may be added to the Services by written agreement of the Parties. The Parties agree that the definition of Products can and may be expanded to include additional product or products.

(PTX 82, Attachment A) (emphasis added)

         AgroFresh provided Dr. Mir a $300, 000 annual salary while the parties worked toward commercializing the combination technology. (PTX 83 § 3.1) AgroFresh provided Dr. Mir this salary to ensure that he need not look for other sources of income. (D.I. 94 at 140-141, 159-160; see also D.I. 96 at 634-635) As the Products achieved commercial success, Dr. Mir would receive the greater of the $300, 000 salary or a royalty stream based on a percentage of sales. (PTX 82 §§ 3.1 & 3.3; PTX-83 § 3.1) The Agreements tied Dr. Mir's royalty stream to the definition of "Product." (PTX 82, § 3.1) Prior to the 2015 extension of the Agreements, discussed infra, Dr. Mir never received any royalty on MAP alone or 1-MCP alone. (D.I. 95 at 324-325)

         D. Course of Conduct - January 2011 through December 2013

         The original term of the Consulting Agreement ran from January 1, 2011 through December 31, 2013. (PTX 83 § 1)[6] During this time frame, Dr. Mir and AgroFresh worked on extending the application of AgroFresh's core competency, 1-MCP stabilization and delivery, to additional crops. (D.I. 94 at 80-81) The focus was on commercializing the RipeLock™[7] combination technology by 2014. (PTX 405) In the course of this work, Dr. Mir had frequent interaction with AgroFresh employees, and access to AgroFresh's facilities and commercial and technical information. (D.I. 94 at 80-82) For example, AgroFresh's analytical chemists provided Dr. Mir support in setting up his lab to measure 1-MCP accurately. (PTX-416; PTX 392) Dr. Mir gained an understanding of the efficacy of the SmartFresh™[8] delivery system. (PTX 315; PTX 96; PTX 408; PTX 338; and PTX 159) The research and development related to combining "the benefits of MAP and SmartFresh™ through custom made package design, tailored for the produce based on market needs, " included countless trials on bananas and other crops. (PTX 392; PTX 15; PTX 339; PTX 406; PTX 432; PTX 405) Although these trials generally involved the SmartFresh 1-MCP delivery system, the "developmental prioritization" described the combination technology simply as "MAP 1MCP combo, " not limited to SmartFresh. (PTX405) In July 2013, the parties executed the First Extension to the Consulting Agreement, which extended the term until December 31, 2014. (DTX 2)

         By the fall of 2013, Dr. Mir and colleagues at Rutgers University were working on encapsulating 1-MCP in (3-cyclodextrin, a project not involving the RipeLock combination technology. (PTX 89) Dr. Mir requested a separate confidential disclosure agreement with AgroFresh before sharing these "new ideas." (DTX 68) In the "Agreement for Information and Samples, " the "field of discussions" included 1-MCP as an "active ingredient for produce treatment; formulations incorporating 1-MCP; method of applying 1-MCP and formulations thereof to produce; encapsulants for 1-MCP and formulations thereof, especially encapsulants comprising cyclodextrin and derivatives or isomers thereof." (DTX 69) In December 2013, Dr. Mir presented to AgroFresh his "first patent application along with figures which [was] due to publish on January 9, 2014." (DTX 73) As explained by Dr. Mir, the application examined "hydrocolloid systems for controlling gas release from alpha cyclodextrin, " as well as "[l]ow water solubility and potential high inclusion in modified beta-cyclodextrin ... to develop a non-phytotoxic water based sprayable 1-MCP formulation." (Id.)

         MirTech suggests that Dr. Mir introduced the following invention at the December 12, 2013 meeting: "a polymerized beta-cyclodextrin, where the 1-MCP molecule is stabilized by adsorbing it to the outside of the polymer, rather than being encapsulated inside it." (D.I. 89 at ¶ 25) The only contemporary evidence MirTech points to is a single molecular diagram captioned "Modifying encapsulant: polymerization." (DTX 73 at ¶ 2814) Indeed, Dr. Mir's notes from the meeting do not mention "adsorption, " only encapsulation. (DTX 185) At trial, Dr. Mir admitted that at the time of the December 2013 presentation, he did not know whether, in his "modified beta-cyclodextrin polymer, " the 1-MCP was encapsulated or adsorbed.[9] (D.I. 96 at 655-656) The court finds, therefore, that Dr. Mir did not present his invention as described by MirTech at the December 12, 2013 meeting with AgroFresh.[10]

         Nevertheless, there is no dispute that the presentation covered 1-MCP information "outside of RipeLock" (DTX 185); while AgroFresh thought the presentation could have taken place within the scope of the Agreements, Dr. Mir did not. (DTX 68) The record reflects that AgroFresh did not inform Dr. Mir that he had breached the Agreements by filing the patent application in his own name, or that the Agreements covered the technology presented. Dr. Mir did not disclose that he intended to use his 1-MCP technology to compete with AgroFresh.

         E. Course of Conduct January 2013 through December 2014.

         AgroFresh was not interested in commercializing the (3-cyclodextrin and 1-MCP analog concepts Dr Mir presented in December 2013, because the technologies did not solve a commercial need or augment AgroFresh's existing product line. (D.I. 94 at 182-185) The parties continued their work on the RipeLock trials and commercialization efforts. (PTX 448; PTX 348) The record contains one patent that issued to AgroFresh (with Dr. Mir listed as one of the inventors) in August 2014 that covers the combination technology. (DTX 309)

         In contrast to the one AgroFresh patent in evidence, the record is replete with work Dr. Mir was pursuing on his own, including the filing of various patent applications and the issuance of two patents in August and September 2014, respectively, which were variants on the hydrocolloid systems presented to AgroFresh in December 2013. (PTX 451; PTX 452; see also PTX 434) Dr. Mir kept AgroFresh apprised of this work concurrently with the filings. (DTX 85; DTX 87; DTX 89) AgroFresh neither expressed an interest in, nor claimed ownership of, this work under the Agreements.

         In July 2014, the parties executed a Second Extension of the Consulting Agreement to December 31, 2015. (PTX 85) By email dated October 29, 2014, Dr. Mir inquired as to whether AgroFresh still had interest in his "IP. Some parties have recently approached for acquiring my patents but I told them my preference is to work with AF and I am committed to my contract at AF until the end of this year unless they communicate otherwise."[11] (DTX 95) The only "patents" Dr. Mir ...


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