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Omegagenesis Corp. v. Mayo Foundation For Medical Education and Research

United States Court of Appeals, Eighth Circuit

March 20, 2017

OmegaGenesis Corporation Plaintiff- Appellant
v.
Mayo Foundation for Medical Education and Research Defendant-Appellee

          Submitted: October 20, 2016

         Appeal from United States District Court for the District of Minnesota - Minneapolis

          Before RILEY, Chief Judge, [1] LOKEN and BENTON, Circuit Judges.

          LOKEN, Circuit Judge.

         OmegaGenesis Corporation (Omega) filed this diversity action against Mayo Foundation for Medical Education and Research (Mayo), a Minnesota charitable corporation, asserting claims of fraud, negligent misrepresentation, breach of contract, and breach of the implied covenant of good faith and fair dealing. The lawsuit arises out of an Exclusive Patent License Agreement (the Agreement) in which Omega, a start-up company, agreed to pursue Mayo's pending patent application, to develop and market licensed products "described by a pending claim" in that application, to grant Mayo ten percent of Omega stock, and to pay Mayo royalties of five percent of licensed product net sales. The patent application was abandoned after the U.S. Patent and Trademark Office denied an elected group of claims as anticipated by prior art. See 35 U.S.C. § 102(a)(1). Omega alleges that it suffered damages because it relied on Mayo's pre-Agreement false representations that it developed the technology and on Mayo's failure to disclose knowledge of prior art that made the technology unpatentable. The district court[2] dismissed all claims. OmegaGenesis Corp. v. Mayo Found. for Med. Educ. & Research, 132 F.Supp.3d 1119 (D. Minn. 2015). Omega appeals dismissal of its fraud and negligent misrepresentation claims. Reviewing the grant of a motion to dismiss de novo, we affirm. Quintero Cmty. Ass'n Inc. v. F.D.I.C., 792 F.3d 1002, 1008 (8th Cir. 2015).

         I. Background.

         We take background facts from the Omega Complaint, assuming the truth of its fact allegations, and from the Agreement and portions of the patent application file placed in the record without objection by a Declaration of Mayo's attorney before the district court ruled on Mayo's motion to dismiss. See Enervations, Inc. v. Minn. Min. & Mfg. Co., 380 F.3d 1066, 1069 (8th Cir. 2004); Vitek Sys., Inc. v. Abbott Labs., 675 F.2d 190, 192 n.4 (8th Cir. 1982); Fed.R.Evid. 201.

         The September 2008 Agreement recited that Mayo wished to make intellectual property rights available "for the development and commercialization of products, methods and processes . . . including nano rod technology, " and that Omega "represents itself as being knowledgeable in developing and commercializing nano rod technology." The Agreement granted Omega an exclusive license to make, use, and sell the Licensed Products, and a non-exclusive license to use the Know-How to develop and sell the Licensed Products. The Agreement defined "Licensed Product" to include "any product or process" described by a claim in the pending patent application, and defined "Know-How" as including technical data, trade secrets, and supportive information "owned and controlled by Mayo . . . to the extent it is reasonably related to [the patent application] as developed in the laboratory of Dr. Debabrata Mukhopadhyay or any person working under his direction or control."

         In Section 9.01(b) of the lengthy Agreement, Omega warranted that it had "independently evaluated the Patent Rights, Know-How, and Confidential Information . . . [and] is entering into this Agreement on the basis of its own evaluation and not in reliance o[n] any representation by Mayo . . . ." Section 9.03 stated that Mayo was providing the Know-How, confidential information, and patent rights "as is, " "with all faults, " and "with all defects, " and expressly disclaimed any implied warranties with respect to the "scope, validity or enforceability of the patent rights or Know-How, " or that any patent will issue based upon any pending patent application. Section 11.03 provided that the "terms and conditions of this Agreement, as well as all disputes arising under or relating to this Agreement, shall be governed by Minnesota law, specifically excluding its choice-of-law principles." An "Entire Agreement" provision, Section 11.08, stated that the Agreement superseded all prior discussions, proposals, promises, and understandings.

         Omega's Complaint alleged that its CEO had "substantial experience and contacts with medical technology and venture capital" and formed Omega in response to representations by Mayo that it "had developed and [was] in the process of patenting certain technology related to angiogenesis, which is the creation of blood vessels." After entering into the Agreement, the Complaint alleges, Omega held an "investor conference" on October 14, 2008 that raised $500, 000, entitling Mayo to acquire Omega stock. At the conference, the claimed inventors, Dr. Mukhopadhyay and Dr. Chittaranjan Patra, "presented their claimed discovery and patents." However, Mayo "refused to assist OmegaGenesis in prosecuting the patents." "Ultimately, the patent was denied due to the existence of prior art."

         We set forth the factual allegations relating to Omega's claims of fraud and negligent misrepresentation, the only claims at issue on appeal:

-- In the Agreement, Mayo represented that it owned the technology that was the subject of the pending patent application, and that the Know-How had been "developed in the laboratory of Dr. Debabrata Mukhopadhyay or any person working under his direction or control."
-- "During the negotiations . . . [Mayo] employees claimed to have spent substantial time developing the technology." A February 20, 2008 email stated that "the nanotechnology venture was the brainchild of Debabrata Mukhopadhyay." In a March 4, 2008 email, Dr. Mukhopadhyay sent "highlights of our research work" and the patent application, which includes a representation that the claimed inventors do not know of prior art that would "change that conclusion." At a June 2008 meeting, Mayo presented the discovery and patent filing, introduced lab staff "as the discoverers of the nanoparticle angiogenesis effect, " and introduced Patra as the "lead person."
-- Mayo refused to provide Omega inventors notebooks, test results, and other information Omega requested for its due diligence but assured Omega "of the legitimacy of the ...

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