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Ibio, Inc. v. Fraunhofer-Gesellschaft Zur Forderung Der Angewandten Forschung E.V.

Court of Chancery of Delaware

December 10, 2018

IBIO, INC., Plaintiff,
v.
FRAUNHOFER-GESELLSCHAFT ZUR FORDERUNG DER ANGEWANDTEN FORSCHUNG E.V., Defendant.

          Date Submitted: October 9, 2018

          David E. Ross and Eric D. Selden, ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; Reed S. Oslan, Mark Premo-Hopkins, Britt Cramer, and Allison McDonald, KIRKLAND & ELLIS LLP, Chicago, Illinois; Inbal Hasbani and Kyla Jackson, KIRKLAND & ELLIS LLP, New York, New York; Attorneys for Plaintiff.

          M. Duncan Grant, Christopher B. Chuff, James H. S. Levine, and Ellis E. Herington, PEPPER HAMILTON LLP, Wilmington, Delaware; Attorneys for Defendant.

          MEMORANDUM OPINION

          MONTGOMERY-REEVES, VICE CHANCELLOR.

         Two companies, a Delaware biotechnology corporation and the wholly owned subsidiary of a German applied research company, entered into multiple agreements to develop plant-based technology for biopharmaceuticals. Plaintiff, the Delaware corporation, contends that it owns all rights to any technology the subsidiary developed for Plaintiff, including the right of exclusive ownership. The subsidiary allegedly breached the agreements when it misappropriated and refused to transfer the technology to Plaintiff, and Plaintiff has asserted related claims against the subsidiary in separate litigation.

         Here, Plaintiff is suing the German parent company because, Plaintiff claims, the parent company had knowledge of and was involved in the subsidiary's breaches of the agreements. Defendant moves to dismiss this matter, arguing that this Court lacks jurisdiction over it, that Plaintiff failed to timely file its claims, and that Plaintiff fails to state any claim upon which relief can be granted.

         I conclude that this Court has personal jurisdiction over Defendant but Plaintiff failed to timely file this matter. I, therefore, grant Defendant's motion to dismiss.

         I. BACKGROUND

         For purposes of the Motion to Dismiss, I draw all facts from Plaintiff's Verified Complaint (the "Complaint"), the documents incorporated by reference therein, and affidavits submitted by the parties.[1]

         Plaintiff iBio, Inc. ("iBio") is a Delaware corporation with its principal place of business in Newark, Delaware.[2] iBio is a biotechnology company that "focuse[s] on using its proprietary technologies and production facilities to provide product development and manufacturing services to others, as well as to develop and commercialize its own [products]."[3]

         Defendant Fraunhofer-Gesellschaft zur Förderung der Angewandten Forschung E.V. ("FhG") is a not-for-profit company organized and existing under the laws of the Federal Republic of Germany with its principal place of business in Munich, Germany.[4] FhG is one of the largest and most successful applied research organizations in Europe and the world.[5] Non-party Fraunhofer USA, Inc. ("FUSA") is a Rhode Island corporation with its principal place of business in Plymouth, Michigan.[6] FUSA is a wholly owned subsidiary of FhG.[7]

         iBio entered into several agreements with FUSA starting in 2003 to develop plant-based technology for the manufacture of biopharmaceuticals and other products.[8] Under the terms of the agreements, iBio exclusively owns the technology FUSA developed under these agreements.[9] iBio claims that FUSA misappropriated the technology for its own benefit and refused to transfer the technology to iBio.[10]iBio brought separate actions related to FUSA's alleged misappropriation of the technology. Initially, iBio sued PlantForm Corporation ("PlantForm"), a competitor, on October 17, 2014, to prevent PlantForm's use of iBio technology that FUSA had improperly disclosed to PlantForm.[11] Next, on March 17, 2015, iBio filed an action against FUSA alleging that FUSA breached its contracts with iBio.[12]Now, in this action against FhG, filed on November 3, 2017, iBio contends that (1) FhG, as the parent corporation of FUSA, had a principal-agent relationship with FUSA and directed FUSA to breach the agreements with iBio and (2) FhG conspired with FUSA to breach the agreements.[13]

         II. ANALYSIS

         FhG moves to dismiss this matter, arguing that this Court lacks personal jurisdiction over it, that iBio failed to timely file its claims, and that iBio fails to state any claim upon which relief can be granted.

         I conclude that this Court has personal jurisdiction over FhG but iBio failed to timely file this action.

         A. Personal Jurisdiction

         "When a defendant moves to dismiss a complaint pursuant to Court of Chancery Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the [C]ourt's exercise of jurisdiction over the defendant."[14]

         Courts may exercise general or specific jurisdiction over a defendant. State courts exercise general jurisdiction over a defendant corporation when the corporation is incorporated in or has its principal place of business in that state.[15]The parties agree that this Court lacks general jurisdiction over FhG.[16]

         When a party is not subject to general jurisdiction, Delaware courts apply a two-step analysis to determine whether the exercise of specific personal jurisdiction over a nonresident is appropriate. "First, we must consider whether Delaware's long arm statute [applies], recognizing that 10 Del. C. § 3104(c) is to be broadly construed to confer jurisdiction to the maximum extent possible under the Due Process Clause" of the Fourteenth Amendment of the United States Constitution.[17] Delaware law recognizes alternative theories to satisfy the requirements of the long-arm statute, including theories of agency and conspiracy.[18] Second, "the [C]ourt must determine whether subjecting the nonresident defendant to jurisdiction in Delaware violates the Due Process Clause."[19] "If, as here, no evidentiary hearing has been held, plaintiffs need only make a prima facie showing of personal jurisdiction and 'the record is construed in the light most favorable to the plaintiff.'"[20]

         iBio asserts that FhG's conduct falls under Section 3104(c)(1) and (c)(3) of Delaware's long-arm statute[21] under two legal theories: conspiracy theory of jurisdiction and agency theory of jurisdiction.[22] iBio claims that FUSA, as FhG's co-conspirator and agent, (1) transacted business and performed work in Delaware that caused iBio's injury and (2) caused tortious injury in Delaware by defrauding iBio and misappropriating its trade secrets.[23]

         To subject a conspirator to this Court's jurisdiction, iBio must make a prima facie showing of the five-element test adopted by the Supreme Court of Delaware in Istituto Bancario Italiano SpA v. Hunter Engineering Co.:

(1) a conspiracy to defraud existed; (2) the defendant was a member of that conspiracy; (3) a substantial act or substantial effect in furtherance of the conspiracy occurred in the forum state; (4) the defendant knew or had reason to know of the act in the forum state or that acts outside the forum state would have an effect in the forum state; and (5) the act in, or effect on, the forum state was a direct and foreseeable result of the conduct in furtherance of the conspiracy.[24]

         "[T]he five elements of the Istituto Bancario test functionally encompass both prongs of the jurisdictional test. The first three . . . elements address the statutory prong of the test. The fourth and fifth . . . elements address the constitutional prong of the test."[25]

         To determine the existence of a conspiracy, the first Istituto Bancario element, this Court uses another five-element test: there must be "(1) two or more persons; (2) some object to be accomplished; (3) a meeting of the minds between or among such persons relating to the object or a course of action; (4) one or more unlawful acts; and (5) resulting proximate damages."[26] FhG argues that iBio's allegations do not state the existence of a conspiracy.[27]

         iBio alleges in its Complaint that representatives of both FhG and FUSA repeatedly and consistently represented to iBio that FUSA understood iBio's exclusive ownership of the technology.[28] FhG approved the agreements FUSA entered into with iBio and, thus, was aware of the contents of these agreements.[29]Representatives of FhG and FUSA also represented to iBio that FhG intended to ensure FUSA's respect for iBio's ownership rights.[30] iBio relied on FhG and FUSA's representations that the Delaware division of FUSA would transfer the technology to iBio.[31] Despite these representations and in breach of FUSA's contractual obligations, FUSA withheld transfer of the technology to iBio, and FhG explicitly approved this conduct, notwithstanding FhG's prior approval of iBio's exclusive ownership.[32] FUSA also allegedly disclosed iBio's technology to third parties without iBio's consent.[33] FhG approved the agreements between FUSA and the third parties that required the unlawful disclosure.[34] Further, senior management of FhG informed iBio that no resolution of iBio's dispute with FUSA can proceed without FhG's approval.[35] These allegations imply a plan between FhG and FUSA to misappropriate technology properly belonging to iBio. iBio sufficiently shows the five elements required for the existence of a conspiracy.

         FhG fails to address the remaining Istituto Bancario elements in its briefs, stating only that if iBio fails to allege the existence of a conspiracy, then inquiry into the remaining four elements is moot.[36] Nonetheless, iBio's allegations support a prima facie showing of these four elements.

         By alleging that FhG had a role in FUSA's withholding of technology from iBio, a corporation with its principal place of business in Delaware, iBio makes a prima facie showing that FhG was a member of the conspiracy and that a substantial effect in furtherance of the conspiracy occurred in Delaware. Plaintiff, thus, satisfies the second and third Istituto Bancario elements.

         The final two elements evaluate whether "the defendant knew or had reason to know of the act [or effect] in the forum state" and whether the act or effect "was a direct and foreseeable result of the conduct in furtherance of the conspiracy."[37]Several of iBio's allegations are relevant to these elements. First, FhG approved the agreements between iBio and FUSA.[38] Second, FhG explicitly approved FUSA's refusal to transfer the technology to iBio, a corporation with its principal place of business in Delaware.[39] Third, FhG approved agreements between FUSA and third parties that required FUSA to misappropriate or improperly disclose iBio's technology. Fourth and finally, senior management from FhG met with iBio and made it "clear that FhG would need to approve any resolution regarding iBio's concerns over [FUSA]'s use of iBio's technology."[40] These allegations show that FhG knew of (1) the dispute between FUSA and iBio and (2) the act, FUSA's withholding of technology from iBio, giving rise to that dispute. Because a central purpose of the alleged conspiracy was to misappropriate technology properly belonging to iBio, the withholding of technology was a direct and foreseeable result of the conduct in furtherance of the conspiracy.

         For the reasons explained above, I conclude that iBio has made a prima facie showing that all of the Istituto Bancario elements are met and, thus, that this Court has personal jurisdiction over FhG under the conspiracy theory of jurisdiction.[41]

         B. The Doctrine of Laches

         Having determined that this Court has personal jurisdiction over FhG, I must next consider whether iBio's claims are barred under the doctrine of laches. The doctrine of laches "is rooted in the maxim that equity aids the vigilant, not those who slumber on their rights."[42]

Statutes of limitations exist at law and serve to bar claims brought after the limitations period set forth in the statute has expired. Statutes of limitations traditionally do not apply directly to actions in equity, although courts of equity may apply them by analogy in determining whether a plaintiff should be time-barred under the equitable doctrine of laches.[43]

         "[T]he Court . . . afford[s] significant weight to an analogous statute of limitations when one exists and will presumptively bar an action filed after the limitations period, absent tolling or unusual circumstances that would make it inequitable to do so."[44]

         The parties agree that the analogous statute of limitations for Plaintiff's claims is three years.[45] They dispute, however, whether the three years have passed. iBio argues that the statute of limitations should be tolled because FhG fraudulently concealed its involvement in the alleged breaches of contract.[46] FhG contends that iBio had, at a minimum, inquiry notice of its claims against FhG by no later than June 2014, thus barring iBio's claims in June 2017.[47]

         The statute of limitations may be tolled for claims "where the facts underlying a claim were so hidden that a reasonable plaintiff could not timely discover them."[48]"[T]he limitations period begins to run when the plaintiff is objectively aware of the facts giving rise to the wrong, i.e., on inquiry notice."[49] When a party has "facts sufficient to make him suspicious, ...


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