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CytoDyn of New Mexico, Inc. v. Amerimmune Pharmaceuticals, Inc.

Court of Appeal of California, Second Appellate District, Division Eight

February 20, 2008, Filed

B187661

Opinion

 [**602]  RUBIN, J.

SUMMARY

The trial court erred in awarding attorney fees under a provision of the Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.), which authorizes an award of fees if a claim of misappropriation of trade secrets is made in bad faith. Plaintiff's complaint asserted a claim for unjust enrichment based on the alleged misappropriation of its patents and trademarks, and erroneously requested damages  [**603]  under the Uniform Trade Secrets Act. However, the complaint cannot be read as alleging a claim for misappropriation of trade secrets. The court also erred in concluding that attorney fees were recoverable under the indemnification clause of a licensing agreement. Accordingly, the order awarding attorney fees is reversed.

FACTUAL AND PROCEDURAL BACKGROUND

On February 11, 2003, CytoDyn  [***2] of New Mexico, Inc. (CytoDyn), filed a lawsuit naming as defendants Amerimmune Pharmaceuticals, Inc., and several of its officers or directors, including Pamela M. Kapustay, Kimberly L. Cerrone, O.B. Parrish, and Michael A. Davis (officers and directors). Amerimmune Pharmaceuticals was dismissed from the case a few months later, after it filed a bankruptcy petition. In December 2003, an amendment to the complaint was filed adding Maya LLC as a Doe defendant. On March 23, 2004, CytoDyn filed a first amended complaint, alleging CytoDyn had assigned all of its assets and liabilities to CytoDyn so that the latter was “the properly-substituted plaintiff” in the lawsuit.

The operative first amended complaint (complaint) alleged as follows. Allen D. Allen, CytoDyn's president and chief executive officer, is the inventor of a class of monoclonal antibodies for the treatment of HIV disease, and is the owner of a portfolio of United States and foreign patents on his invention. In 1995, CytoDyn obtained a registered United States trademark on the brand name “Cytolin,” referring to the antibodies used to improve immune function in persons infected with HIV, as reflected in Allen's patents.  [***3] CytoDyn spent two years and almost $ 900,000 to develop and test materials and methods for manufacturing Cytolin. In August 1998, Allen and CytoDyn entered into an agreement with Three R Associates, Inc. (Termination, Sale and Shareholder Agreement), under which Allen transferred his rights and  [*292]  interest in the “Technology” to Three R. (“Technology” was the term used to refer collectively to Allen's patents; patent rights; “Know-how”; products embodying or using any part of the patents, patent rights or know-how; and trade secrets. “Trade Secrets” was in turn defined as “all documents and information … that have been originated by, are peculiarly within the knowledge of or are proprietary to Allen … .”) 1 Using a reverse triangular merger, Three R formed Amerimmune, a publicly traded company, and purchased the Technology and patent licensing rights from CytoDyn in return for stock in Amerimmune. Three R licensed the patents and Technology to Amerimmune under a “Patent and Trademark License Agreement,” and Amerimmune assumed the obligation to pay Allen for the patent portfolio. Disputes arose, which Three R settled by assigning all of its rights back to CytoDyn, so that CytoDyn  [***4] again became the licensor under the Patent and Trademark License Agreement. CytoDyn and Allen entered into a conditional licensing agreement (CLA) with Amerimmune under which CytoDyn licensed its trademarks (Marks) and Technology  [**604]  to Amerimmune on substantially the same basis as the earlier Patent and Trademark License Agreement. 2

Disputes arose, the details of which are unnecessary to outline, with CytoDyn claiming that Amerimmune materially breached the CLA, allegedly entitling CytoDyn to terminate the agreement and requiring Amerimmune to transfer to CytoDyn and Allen all rights to the Technology and Marks. CytoDyn filed this lawsuit seeking an injunction and declaratory judgment requiring the Technology to be returned to CytoDyn and Allen. Shortly thereafter, defendant Parrish signed, on behalf of Amerimmune, a promissory note to defendant Maya LLC (which the complaint alleged was an alter ego of the CEO of Amerimmune), giving Maya LLC a security interest in all of Amerimmune's assets. Amerimmune then filed bankruptcy; its note to Maya LLC became due and payable; and Maya LLC foreclosed its security interest and claimed ownership of all Amerimmune's assets, including CytoDyn's  [*293]  Technology. Amerimmune's bankruptcy case was dismissed; defendant officers  [***6] and directors resigned; and Amerimmune ceased operations.

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160 Cal. App. 4th 288 *; 72 Cal. Rptr. 3d 600 **; 2008 Cal. App. LEXIS 243 ***

CYTODYN OF NEW MEXICO, INC., Plaintiff and Appellant, v. AMERIMMUNE PHARMACEUTICALS, INC., et al., Defendants and Respondents.

Prior History:  [***1] Superior Court for the County of Los Angeles, No. BC290154, Andria K. Richey, Judge.

CORE TERMS

trade secret, patents, attorney's fees, misappropriation, Technology, Trademark, officers and directors, lawsuit, Marks, misappropriation of trade secrets, trial court, parties, rights, bad faith, defendants', entitled to an attorney, license agreement, cause of action, allegations, arbitration, damages, licensed, induced, unjust enrichment, Termination, provisions, indemnification clause, exemplary damages, circumstances, documents

Trade Secrets Law, Civil Actions, Remedies, General Overview, Damages, Costs & Attorney Fees, Civil Procedure, Pleadings, Complaints, Requirements for Complaint, Attorney Fees & Expenses, Basis of Recovery, Statutory Awards