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AgroFresh Inc. v. Essentiv, LLC

United States District Court, D. Delaware

December 27, 2018

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

          REPORT AND RECOMMENDATION

          Sherry R. Fallon United States Magistrate Judge.

         I. INTRODUCTION

         Presently before the court in this patent infringement action is the motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), filed by defendants UPL, Ltd., Decco U.S. Post Harvest, Inc., Cerexagri, Inc., and Essentiv, LLC, (collectively, "Decco"). (D.I. 131)[1] For the following reasons, I recommend that the court grant-in-part Decco's motion to dismiss.

         II. BACKGROUND

         A. Parties

         AgroFresh is an Illinois corporation having a principal place of business in Philadelphia, Pennsylvania. (D.I. 106 at ¶ 9) AgroFresh researches, develops, and sells technology for pre-and post-harvest freshness preservation of fruits, vegetables, and other produce using a synthetic, volatile gas called 1-methylcyclopropene ("1-MCP"). (Id. at ¶ 2) AgroFresh owns patents on technologies used by growers to control the ripening of fruits and vegetables to reduce waste and improve product quality. (Id.) These patents include the asserted U.S. Patent Nos. 6, 017, 849 ("the '849 patent") and 6, 313, 068 ("the '068 patent"). (Id. at ¶ 22) AgroFresh's products include SmartFresh, Harvista, and RipeLock. (Id. at ¶ 2)

         Dr. Mir is an inventor and expert in the field of post-harvest technology who has developed technologies relating to 1-methylcyclopropene ("1-MCP"), including an invention that combines 1-MCP with an engineered film known as a modified atmospheric package ("MAP"). (Id. at ¶ 34) Mir Tech is a New Jersey corporation maintaining its principal place of business in Somerset, New Jersey, which is solely owned by Dr. Mir. (Id. at ¶¶ 10-11)

         Decco U.S. Post-Harvest is a Delaware corporation with a principal place of business in California. (Id. at ¶ 12) Cerexagri d/b/a Decco Post-Harvest is a Pennsylvania corporation with a principal place of business in Pennsylvania. (Id. at ¶ 13) Essentiv LLC is a Delaware limited liability company formed in accordance with a joint venture of MirTech and Decco. (Id. at ¶ 14) UPL is incorporated in India, with its principal place of business in Mumbai, India. (Id. at ¶ 15)

         B. Facts

         Between 2010 and 2016, AgroFresh and Dr. Mir operated under a Consulting Agreement and a Commercial Agreement (together, the "Agreements") to develop technology combining AgroFresh's 1-MCP expertise and Dr. Mir's modified atmosphere package ("MAP") technology. (Id. at ¶¶ 35-44) Pursuant to the Agreements, Dr. Mir agreed to provide services related to combining his MAP technology and 1 -MCP, MirTech agreed to assign its proprietary interests and rights in any patent application or issued patent related to Dr. Mir's products. (Id.) The Agreements obligated the MirTech defendants not to compete with AgroFresh, and they contained confidentiality and automatic assignment clauses. (Id. at ¶ 40)

         In 2013, the MirTech defendants began working on other technology related to encapsulating 1-MCP, which they did not disclose to AgroFresh. (Id. at ¶ 47) Instead, Dr. Mir independently pursued a provisional patent application on the new technology and signed a letter of intent ("Letter of Intent") with Decco in 2014 to develop and market the new technology. (Id. at ¶¶ 48, 54) In 2015 and 2016, Decco and the MirTech defendants prosecuted the application resulting in U.S. Patent No. 9, 394, 216 ("the '216 patent"), ran trials, and developed the product ultimately registered as TruPick™. (Id. at ¶¶ 56, 61, 76)

         In July 2016, Decco and the MirTech defendants issued a press release announcing the EPA registration of TruPick. (Id. at ¶ 76) The press release was AgroFresh's first notice of the research and development efforts between Decco and the MirTech defendants. (Id. at ¶ 78) AgroFresh subsequently sent a letter to the MirTech defendants asking them to cure their breaches of the Agreements and indicating its intention to terminate the Agreements absent a cure of the breaches. (Id. at ¶ 80)

         C. Procedural History

         On August 3, 2016, AgroFresh filed its original complaint. (D.I. 2) The complaint included 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 was developed and filed by MirTech. Count IV of the complaint includes allegations that 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 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. In its Findings of Fact and Conclusions of Law, entered on June 30, 2017, the court entered judgment in favor of AgroFresh and against Mir and MirTech on Counts I and IV. (D.I. 97 at 33-34) Specifically, the court concluded that the '216 patent was an improvement related to the product which was automatically assigned to AgroFresh, and Mir fraudulently induced AgroFresh into executing an extension to various agreements by not disclosing the '216 patent disclosure or Mir's business relationship with Decco. (Id.)

         Following the court's decision, AgroFresh filed its first amended complaint ("FAC") against the same original parties and added UPL Ltd. as a defendant. (D.I. 106) The FAC added causes of action under the Trade Secrets Act, the Pennsylvania Trade Secrets Act, and related tort theories. (Id. at ¶¶ 224-269) On September 15, 2017, MirTech, Mir, and AgroFresh executed a private settlement agreement (the "Settlement Agreement"). (D.I. 178, Ex. A) On September 18, 2017, Mir and MirTech entered into a final consent judgment with AgroFresh, pursuant to which Mir and MirTech "consent[ed] to a judgment establishing liability" for all counts alleged against them and "agree[d] to remit payment... to compensate AgroFresh," including $340, 000 in damages. (D.I. 115) On September 29, 2017, a scheduling order was entered on the remaining counts of the FAC. (D.I. 122)

         III. LEGAL STANDARD

         Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Connelly v. Lane Const. Corp., 809 F.3d 780, 790-91 (3d Cir. 2016).

         To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56. While the plausibility standard "does not impose a probability requirement, it does require a pleading to show more than a sheer possibility that a defendant has acted unlawfully." Connelly, 809 F.3d at 786 (internal quotations and citations omitted).

         When determining whether dismissal is appropriate, the court must take three steps.[2] Id. at 787; Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject conclusory allegations. Id. at 678. Third, the court should assume the veracity of the well-pleaded factual allegations identified under the first prong of the analysis, and determine whether they are sufficiently alleged to state a claim for relief. Id; see also Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on [the court's] experience and common sense." Id. at 663-64; see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         IV. ANALYSIS

         A. Claims against Mir and MirTech (Counts II-IV, VI, and VIII)

         In support of the motion to dismiss, Decco contends that AgroFresh's claims for breach of contract, fraud, fraudulent inducement, constructive fraud, and breach of the duty of loyalty should be dismissed because they were only asserted against Mir and MirTech, and they fail to state a claim against Decco. (D.I. 132 at 4) In response, AgroFresh does not dispute that the causes of action were raised only against Mir and MirTech, and challenges Decco's standing to seek dismissal on that basis. (D.I. 139 at 4) According to AgroFresh, the entry of a final judgment on the counts indicates that the counts meet the 12(b)(6) standard and have been conclusively established. (Id.)

         I recommend that the court deny Decco's motion to dismiss as moot with respect to Counts II-IV, VI, and VIII. The parties agree that these counts were brought only against Mir and MirTech, and do not state a claim against Decco. Consequently, Decco has no obligation to defend against these causes of action. The parties also agree that the court entered final judgment on these counts in AgroFresh's favor.[3] (D.I. 97) Decco cites no authority in support of ...


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