UCB MANUFACTURING, INC., Plaintiff–Appellant, v. TRIS PHARMA, INC. and YU–HSING TU, Defendants–Respondents, PAR PHARMACEUTICAL, INC. and PAR PHARMACEUTICAL COMPANIES, INC., Defendants.
DOCKET NO. A–5095–10T2
-- August 27, 2013
Ha Kung Wong (Fitzpatrick, Cella, Harper & Scinto) of the New York bar, admitted pro hac vice, argued the cause for appellant (Graham Curtin, and Mr. Wong, attorneys; Thomas R. Curtin, on the brief).Charles A. Weiss (Holland & Knight, L.L.P.) of the New York bar, admitted pro hac vice, argued the cause for respondents (Riker Danzig Scherer Hyland & Perretti, L.L.P., and Mr. Weiss, attorneys; Joshua S. Bratspies, on the brief).
Plaintiff UCB Manufacturing, Inc. appeals from summary judgment in the Chancery Division dismissing its claims for breach of contract and unfair competition. Plaintiff alleges that defendant Yu–Hsing Tu, its former employee, breached his employment agreement by disclosing plaintiff's confidential information to his current employer, defendant Tris Pharma, Inc. Plaintiff alleges that the confidential information was used by Tu and Tris Pharma to develop a generic cough medicine that is the bio-equivalent of plaintiff's formerly-patented product Tussionex®.
The Chancery Division concluded that all the confidential information alleged to have been divulged was in the public domain and not entitled to protection under Tu's confidentiality agreement. Applying New York law, the court further concluded that Tu's agreement was unenforceable with respect to any of the alleged categories of confidential information identified by plaintiff.
Plaintiff contends on appeal that the trial court made erroneous factual findings regarding the confidential information, prematurely granted summary judgment when discovery was incomplete, and improperly relied on its own credibility findings favorable to defendants that resulted from an evidentiary hearing on whether a preliminary injunction should be granted to plaintiff.
We affirm the summary judgment. Even if plaintiff is correct that disputed issues of fact existed regarding the availability of some of the alleged confidential information in the public domain, and even if the Chancery judge erred procedurally in relying on his own earlier credibility findings, the pertinent New York law supports the judge's ultimate conclusion that Tu's agreement is unenforceable as plaintiff now seeks to enforce it.
Plaintiff filed a verified complaint in October 2010 against Tu, Tris Pharma, and two other corporate entities,1 asserting claims for misappropriation of trade secrets, breach of contract, and unfair competition. The complaint alleged that Tu is now a vice-president of Tris Pharma for research and development. He had previously worked for companies that were predecessors of plaintiff UCB, and had been involved in the manufacture of Tussionex while so employed. Plaintiff held patents for Tussionex, the latest of which expired in 2005.
The complaint alleged that Tu had executed a confiden-tiality agreement, and that Tu and Tris Pharma had engaged in unfair competition by using trade secrets and confidential information of UCB to develop and market a product “that directly competes with Tussionex.” Plaintiff sought declaratory and injunctive relief and “[d]ivestment or disgorgement of the benefit by which defendants have been unjustly enriched.” The complaint did not include a demand for trial by jury.
The Chancery judge initially denied plaintiff's application for temporary restraints and scheduled a plenary hearing to consider a preliminary injunction. The judge also ordered expedited discovery and directed Tris Pharma to produce documents relating to its manufacturing process for the disputed product. The preliminary injunction hearing was held on five days in December 2010.
The hearing focused on plaintiff's claim of misappropria-tion of its trade secrets. Much of the testimony concerned a comparison of the competing products and of the manufacturing processes of Tris Pharma and plaintiff. On December 23, 2010, the Chancery judge issued a written decision denying a preliminary injunction to plaintiff. As part of that decision, the judge found credible the testimony of Tu and that of the owner and CEO of Tris Pharma, Ketan Mehta. In sum, they testified they had not used any trade secrets or confidential information in their development and manufacturing of Tris Pharma's generic cough medicine.
One month after prevailing at the preliminary injunction hearing, defendants moved for summary judgment dismissing plaintiff's complaint in its entirety. At that time, plaintiff decided to abandon voluntarily the count of its complaint alleging misappropriation of its trade secrets. It cross-moved for leave to file an amended complaint, which would omit that claim and contain a demand for trial by a jury for plaintiff's claims of breach of contract and unfair competition.
Defendants' summary judgment motion was argued in February 2011. The judge concluded at that time that further discovery should be permitted. He carried the motions and directed plaintiff to provide him with specified information regarding the alleged confidential information in dispute. Plaintiff provided the information under seal, describing three highly technical areas of allegedly confidential information that it alleged Tu and Tris Pharma had used in their development of the generic medication.
On April 26, 2011, the parties again appeared before the judge on defendants' summary judgment motion. At the end of their arguments, the judge directed the attorneys to submit simultaneous briefs addressing issues raised at the oral argument. On May 31, 2011, the judge entered an order granting defendants' motion for summary judgment, and on June 8, 2011, he issued a written opinion explaining the reasons for his decision. In the opinion, the judge relied in part on his prior credibility findings in favor of defendants.
Plaintiff filed a timely notice of appeal.
The following facts from the summary judgment record are not in dispute, or are viewed most favorably to plaintiff. See R. 4:46–2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
Tu received a bachelor of science degree in pharmacy from the National Taiwan University. He was awarded a Ph.D. in pharmaceuticals from the University of Iowa in 1986, and he then completed four years of post-doctoral research at the University of Oklahoma. His graduate and post-doctoral studies focused on industrial pharmacy, particularly formulation and development work. While at Iowa and Oklahoma, he gained hands-on experience with some of the equipment and processes that were used in the manufacturing process relevant to this case, and he published a paper pertaining to that process.
Tu worked for UCB's predecessors from 1990 to 2001.2 On September 22, 1996, he signed a confidentiality agreement, which provided, in part:
I shall not disclose to any person, either inside the Company to employees without a need to know, or outside the Company, or use at any time, either during or after termination of employment, except as required in my duties to the Company, any secret or confidential information, whether or not developed by me, unless I shall first obtain written consent of the President of the Company or unless such information shall have become general public knowledge by any means other than disclosure by me. Secret or confidential information shall include, but not be limited to, acquisition or merger negotiations or information, know-how, designs, formulas, processes, devices, machines, inventions, research or development projects, plans for future development, materials of a business nature, financial data, legal documents and records, trade secrets, processes, formula data, techniques, know-how, improvements, inventions, marketing plans, strategies, forecasts, pricing information, customer information, work procedures, personnel and labor relations information, product specifications, financial information, models, blueprints, drawings, vendor information, proprietary information of other persons that has been disclosed to the Company and any other information of a similar nature in a form or to the extent not available to the public.
While at UCB, Tu's primary responsibility was formulation development, and he was the lead formulator for the cough syrup Codeprex®. Codeprex, Tussionex, and plaintiff's non-codeine cough syrup Delsym® are all based on proprietary Pennkinetic® technology, an extended release suspension system that utilizes a coated polymer resin to control the rate of drug release. Codeprex is similar to Tussionex except that its active ingredient is codeine instead of hydrocodone. It is also similar to Delsym, which uses a different active ingredient. Because Tu had a great deal of knowledge about the Pennkinetic system, he was assigned trouble-shooting duties at UCB when there was a problem with the manufacture of Tussionex or Delsym. The certifications of two UCB employees who reported to Tu in the 1990's attested to Tu's knowledge and involvement with the research and development of improvements to plaintiff's Pennkinetic products, including Tussionex. To improve the stability of the product, Tu investigated adding ethylene-diaminetetraacetic acid (EDTA) as an agent to Pennkinetic formulations. In the course of this work, Tu had access to the Tussionex formulation. He was also a member of a committee tasked with compiling and studying all the knowledge regarding the Pennkinetic system, and in that capacity received monthly reports and updates.
Tu left his position, and after a short period of time with other employers, began working for Tris Pharma in October 2001 as its head of research and development. Mehta had founded Tris Pharma in 2000, and Tu was his first employee. Tu and Mehta had known each other since they were both at the University of Oklahoma. Mehta decided that he wanted to build a technology platform that could deliver sustained release liquid products.
Shortly after he arrived at Tris Pharma, Tu began formulating a generic version of Delsym. Two years after that, he began working on a generic Tussionex. By 2007, Tris Pharma had filed abbreviated new drug applications (ANDAs) with the Food and Drug Administration for both generic products and had applied for a patent on its manufacturing process.
Even though it is normal in the pharmaceutical industry for generic versions of name-brand products to be released immediately after a patent expires, there was a significant gap between the expiration of plaintiff's patent for Tussionex in 2005 and the production of a generic version of the medicine. At the preliminary injunction hearing, experts testified about the complexity of the process to manufacture Tussionex, thus preventing pharmaceutical companies from producing and marketing a generic version.
For several years after its patent expired, plaintiff continued to sell its name-brand Tussionex without competition. In 2009, it earned approximately $227 million in sales of Tussionex. However, defendants presented expert testimony at the preliminary injunction hearing to the effect that a generic version of Tussionex could be and was in the process of being produced, by means of using information in the public domain and reverse engineering.3 Defendants contended that Tris Pharma was simply the first one to accomplish the task because of its sustained effort in that regard.
Tris Pharma's generic version of Tussionex was launched on October 1, 2010. Within four weeks of its release, Tris Pharma's generic had captured seventy percent of the market for Tussionex. UCB launched an authorized generic 4 on October 18, 2010, in hopes of dividing the generic market and recovering some of the lost sales.
The parties have included extensive discussion in their briefs about the ingredients, formulations, and processes used in the development and manufacturing of UCB's cough medicines, as well as Tris Pharma's generic version of Tussionex. In this opinion, we will not attempt to describe the chemistry or pharmaceutical processes involved. Suffice it to say that the parties dispute whether Tris Pharma's generic product was developed and manufactured only because Tu learned confidential, proprietary information while employed at UCB, or, as the Chancery judge found, with information available publicly and with general pharmaceutical knowledge he had obtained in the course of his education and work experience.
In denying plaintiff's application for a preliminary injunction, the Chancery judge cited Dolan v. DeCapua, 16 N.J. 599, 614 (1954), and held that plaintiff must prove by clear and convincing evidence that Tris Pharma developed its generic product using plaintiff's trade secrets or confidential information. It found the testimony of Tu and Mehta “to be credible and persuasive” and concluded that “Tris [Pharma] did not, in the development of generic Tussionex, use any of UCB's trade secrets or confidential information to develop its process.” It further found that the process and steps that plaintiff alleges are similar to the Tris Pharma process, as well as the allegedly confidential information concerning the inner-workings of the Pennkinetic system, EDTA, and granulation, are all publicly known information. In addition to other evidence, the Chancery judge pointed out that an expert witness who had not been employed by either party testified that, “without any knowledge of UCB's or Tris [Pharma]'s manufacturing processes, [he] was able to describe a proposed manufacturing process for a ․ generic Tussionex product that included UCB's steps and in the same order.” The judge concluded that plaintiff had not demonstrated a likelihood of prevailing on the merits of any of its claims of misappropriation of trade secrets, breach of the confidentiality agreement, and unfair competition.
Defendants' motion for summary judgment was based on the court's finding that the facts conclusively proved all the alleged confidential information was within the public domain. Plaintiff opposed the motion, contending that the court had erroneously found all the alleged confidential information to be publicly available and that plaintiff had not yet received sufficient discovery from Tris Pharma to develop fully its arguments.
We are generally in agreement with plaintiff that the Chancery judge should not have relied on his prior credibility determinations from the preliminary injunction hearing to rule on defendants' motion for summary judgment. Although it seems logical that a judge who has conducted a lengthy evidentiary hearing and made findings and credibility determinations would not need to repeat the process for his role as a subsequent factfinder at a bench trial, the prior consent of the parties should be obtained to bypass the usual standards applicable to summary judgment.
In setting the standard for summary judgments in Brill, supra, 142 N.J. at 540, the Court stated: “The ‘judge's function is not himself [or herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.’ ” (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L. Ed.2d 202, 212 (1986)). See also Lanzet v. Greenberg, 126 N.J. 168, 174 (1991) (“the court must accept as true all the evidence which supports the position of the party defending against the motion and must accord him [or her] the benefit of all legitimate inferences which can be deduced therefrom, and if reasonable minds could differ, the motion must be denied.” (quoting Pressler, N.J. Court Rules, comment on R. 4:40–2 (1991))); Welsh v. Griffith–Prideaux, Inc., 60 N.J.Super. 199, 207 (App.Div.1960) (Chancery Division should not have resolved disputed issues of fact on summary judgment).
The legal standards are different for a preliminary injunction and for summary judgment. In Doeblers' Pennsylvania Hybrids, Inc. v. Doebler, 442 F.3d 812 (3d Cir.2006), a trademark and tradename infringement case, the United States Court of Appeals stated:
“Inferences concerning credibility that were previously made in ruling on [a] motion for a preliminary injunction cannot determine [a summary judgment] motion and should not be used to support propositions that underpin the decision to grant the motion for summary judgment.” This is because, inter alia, “credibility determinations that underlie findings of fact are appropriate to a bench verdict.” But “they are inappropriate to the legal conclusions necessary to a ruling on summary judgment.”
[Id. at 820 (quoting Country Floors, Inc. v. P'ship Composed of Gepner and Ford, 930 F.2d 1056, 1062–63 (3d Cir.1991).]
See also Sanchez v. Esso Standard Oil Co., 572 F.3d 1, 15 (1st Cir.2009) ( “[I]t is inappropriate for the court, at or after a preliminary injunction hearing, to ‘make findings of fact or conclusions of law that go beyond what is necessary to decide whether a preliminary injunction should be issued.’ ” (quoting 11A Wright, Miller & Kane, Federal Practice and Procedure § 2950)). The United State Supreme Court explained:
The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held. Given this limited purpose, and given the haste that is often necessary if those positions are to be preserved, a preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits. A party thus is not required to prove his case in full at a preliminary-injunction hearing, and the findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits.
[Univ. of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L. Ed.2d 175, 180 (1981) (citations omitted).]
Furthermore, summary judgment is often inappropriate when discovery has not been completed and the relevant information is in the possession or control of the party seeking summary judgment. In Velantzas v. Colgate–Palmolive Co., 109 N.J. 189, 193 (1988), the Court stated: “When ‘critical facts are peculiarly within the moving party's knowledge,’ it is especially inappropriate to grant summary judgment when discovery is incomplete.” (quoting Martin v. Educ. Testing Serv., Inc., 179 N.J.Super. 317, 326 (Ch. Div.1981)).
Here, the Chancery judge should not have relied on fact and credibility findings he made at the preliminary injunction hearing unless the parties were on notice at the time of that hearing and agreed to proceed with the intention that the judge's findings would be binding for purposes of trial or other resolution of the case. To enhance efficiency of Chancery matters, since no jury is involved, trial judges may enter orders or otherwise clarify on the record the preclusive effect of the judge's fact findings at a preliminary stage of the case. In the absence of notice of the controlling procedures, and either consent of the parties or an appropriate ruling by the court regarding its determination to employ such a procedure, the usual summary judgment standard should have been applied.
Despite our conclusion that the Chancery judge should not have relied on his own credibility findings in disposing of the summary judgment motion, we conclude that, as purely a question of law, plaintiff's confidentiality agreement is not enforceable under New York law for the purposes plaintiff seeks to enforce it in this case.
The parties agree that New York law applies to Tu's employment contract with plaintiff. Defendants contend that Tu did not breach the confidentiality agreement because his work at Tris Pharma relied only on general experience and “negative know-how” (which means essentially knowing what does not accomplish the objective sought), neither of which is entitled to protection even if acquired while Tu was employed by plaintiff. Pointing out that UCB dropped its claim of trade secret misappropriation, they argue that UCB has no legitimate business interest in protecting such non-trade-secret information.
Under New York law, courts disfavor post-employment anti-competitive covenants restricting a former employee's ability to seek future employment. Post v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 397 N.E.2d 358, 359 (N.Y.1979); Am. Fed. Grp., Ltd. v. Rothenberg, 136 F.3d 897, 909 (2d Cir.1998). In Reed, Roberts Assocs., Inc. v. Strauman, 353 N.E.2d 590, 593 (N.Y.1976), the New York Court of Appeals stated:
Undoubtedly judicial disfavor of these covenants is provoked by powerful considerations of public policy which militate against sanctioning the loss of a man's livelihood. Indeed, our economy is premised on the competition engendered by the uninhibited flow of services, talent and ideas. Therefore, no restrictions should fetter an employee's right to apply to his own best advantage the skills and knowledge acquired by the overall experience of his previous employment. This includes those techniques which are but skillful variations of general processes known to the particular trade.
Of course, the courts must also recognize the legitimate interest an employer has in safeguarding that which has made his business successful and to protect himself against deliberate surreptitious commercial piracy. Thus restrictive covenants will be enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information. In addition injunctive relief may be available where an employee's services are unique or extraordinary and the covenant is reasonable.
[Reed, supra, 353 N.E.2d at 593 (quotation marks and citations omitted) (emphasis added).]
The principles set forth in Reed have been consistently followed by the New York courts. See, e.g., Am. Broad. Cos., Inc. v. Wolf, 420 N.E.2d 363, 367–68 (N.Y.1981) (anti-competitive covenant will be specifically enforced only if necessary to protect trade secrets, customer lists or good will of employer's business and only if reasonable in time, space or scope); Columbia Ribbon & Carbon Mfg. Co. v. A–1–A Corp., 369 N.E.2d 4, 6 (N.Y.1977) (restrictive covenants that prevent an employee from pursuing a similar vocation after termination are disfavored by law and enforced only if reasonably limited and necessary to protect employer from unfair competition); Gilman & Ciocia, Inc. v. Randello, 866 N.Y.S.2d 334, 335 (N.Y.App.Div.2008) (restrictive covenants “are to be enforced only ․ to the extent necessary to protect the employer's use of trade secrets or confidential customer information”); H & R Recruiters, Inc. v. Kirkpatrick, 663 N.Y.S.2d 865, 866 (N.Y.App.Div.1997) (same); Howard Sys. Int'l, Inc. v. IMI Sys. Inc., 596 N.Y.S.2d 48, 49 (N.Y.App.Div.1993) (same); Scott Paper Co. v. Finnegan, 476 N.Y.S.2d 316, 318 (N.Y.App.Div.1984) (same).
In Primo Enter. v. Bachner, 539 N.Y.S.2d 320, 321 (N.Y.App.Div.1989), the court reasoned that “[w]here trade secrets are not demonstrably involved, there can be no sustainable claim by an employer for protection. Manifestly, an employer can have no legitimate interest in restricting the use of easily accessible information.” As we have stated, the more general rule in the New York cases is that confidential information may be protected, even where trade secrets are not involved, “if the employee's services are truly special, unique or extraordinary and not merely of high value to his employer.” Columbia Ribbon & Carbon Mfg. Co., supra, 369 N.E.2d at 6 (internal quotation marks omitted); accord H & R Recruiters, supra, 663 N.Y.S.2d at 866; Howard Sys. Int'l, supra, 596 N.Y.S.2d at 49. New York courts have been loath, however, to grant enforcement of anti-competitive covenants based solely on the uniqueness of the employee's services. Am. Broad. Cos., supra, 420 N.E.2d at 367 n.6.
Moreover, even when trade secrets are implicated, an employee may not be restrained from using general techniques learned during his or her employment. In Advance Biofactures Corp. v. Greenberg, 478 N.Y.S.2d 344 (N.Y.App.Div.1984), a case with facts similar to this case, the court stated:
A former employee may be restrained from revealing a trade secret learned during his employment to his former employer's competitor, even in the absence of an agreement not to compete. It is clear that such a trade secret may consist not only of a specific formula but also of a manu-facturing process. However, an employee may not be restrained from using the general techniques learned during his employment. “The employer's interest in the trade secret must be crystal clear to justify the restraint of the employee, for whom it may have become part of his general knowledge and experience.”
[Id. at 346 (quoting 2 Callmann, Unfair Competition, Trademarks & Monopolies, § 53.2, at 384) (other citations omitted).]
See also Midland–Ross Corp. v. Yokana, 293 F.2d 411, 412 (3d Cir.1961) ( “Necessarily the former employee may use what he learned in the former employer's business while engaged in business for himself or some business competing with the former employer.”).
Applying these principles, the confidentiality provision in Tu's employment agreement is the kind of restrictive covenant disfavored by the New York courts. It is not limited in terms of time, space, or scope. Rather, it sets forth an exhaustive and non-exclusive list of information that Tu must refrain from disclosing. Many of the descriptions in that list (i.e., “materials of a business nature,” “work procedures”) are so vague as to encompass every phase of Tu's work experience. Moreover, the agreement restrains Tu from disclosing the listed information for the remainder of his career as a pharmaceutical scientist.
Also, strict enforcement of the provision is not necessary to protect plaintiff's legitimate business interests. New York law affords more protection to trade secrets and confidential customer data than to other kinds of allegedly confidential information. Reed, supra, 353 N.E.2d at 594; Gilman & Ciocia, supra, 866 N.Y.S.2d at 335. Here, plaintiff remains ambivalent about whether the information disclosed by Tu constitutes trade secrets.5 However, it abandoned its claim of trade secret misappropriation after the lengthy evidentiary hearing at the preliminary injunction phase of the case.
New York courts have defined a trade secret as a device, formula, or manufacturing process “which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Eagle Comtronics, Inc. v. Pico, Inc., 453 N.Y.S.2d 470, 472 (N.Y.App.Div.) (quoting Restatement of Torts § 757 comment b (1939)) (internal quotation marks omitted), appeal denied, 444 N.E.2d 1012 (1982). The United States Court of Appeals for the Third Circuit, in expanding on the Restatement definition, has explained that “[a] trade secret may be no more than a slight mechanical advance over common knowledge and practice in the art.” SI Handling Sys., Inc. v. Heisley, 753 F.2d 1244, 1255 (3d Cir.1985). The court cautioned, however, that matters that are fully disclosed by a marketed product and are susceptible to reverse engineering cannot be protected as trade secrets. Ibid.
Plaintiff's difficulty in prevailing on its claims is that much of the information alleged to be confidential is disclosed on the Tussionex label and patent, or is susceptible to reverse engineering. Moreover, information specified in plaintiff's submission to the court is not actually used in the manufacture of Tussionex. Further, the specified information does not consist of confidential customer information.
Thus, in order to qualify for protection under New York law, plaintiff was required to show that it would be uniquely harmed by disclosure of the information because Tu's employment by plaintiff was “truly special, unique or extraordinary and not merely of high value.” Columbia Ribbon & Carbon Mfg. Co., supra, 369 N.E.2d at 6. Plaintiff made no such showing. Tu did not invent the Pennkinetic process, nor was he involved with it since its inception. In his capacity as a formulator, he was consulted primarily as a trouble-shooter for the manufacturing process. While his formulation expertise was doubtless of high value to plaintiff, he worked as part of a team and Tussionex continued to be manufactured after he left.
Because the confidential information specified by plaintiff constituted neither trade secrets nor confidential customer data and because Tu's services were not truly special, unique, or extraordinary, plaintiff has no legitimate business interest in protecting the information under the highly-restrictive New York law that applies to enforcement of anticompetitive agreements.
Additionally, enforcement of the confidentiality provision would not further the general public interest. The creative flow of information described in Reed, supra, 353 N.E.2d at 593, is enhanced when employees are permitted to apply the skills and knowledge acquired at a previous employment to a subsequent one. Particularly in the pharmaceutical industry, reliance on past knowledge and experience fosters the creation of high-quality generic products that are available to the public at reduced costs from the market brands.
Plaintiff has a legitimate point in arguing that failure to protect a pharmaceutical company's confidential research and development could stifle subsequent innovation, but it fails to acknowledge that such protection is the specific purpose of the patent laws. The objective of the United States Constitution in granting Congress the power to legislate in the area of intellectual property is to “promote the Progress of Science and useful Arts.” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480, 94 S.Ct. 1879, 1885, 40 L. Ed.2d 315, 325 (1974) (quoting U.S. Const. art. I, § 8, cl. 8). “The patent laws promote this progress by offering a right of exclusion for a limited period as an incentive to inventors to risk the often enormous costs in terms of time, research, and development.” Ibid. Upon expiration of the seventeen-year period of patent protection, “the knowledge of the invention enures to the people, who are thus enabled without restriction to practice it and profit by its use.” Id. at 480–81, 94 S.Ct. at 1886, 40 L. Ed.2d at 325 (quoting United States v. Dubilier Condenser Corp., 289 U.S. 178, 187, 53 S.Ct. 554, 557, 77 L. Ed. 1114, 1118 (1933) (internal quotation marks deleted)). Plaintiff's investment in developing the Pennkinetic system was protected by several patents that allowed it to market its products exclusively for many years. Public policy, as established by the United States Congress, requires no further protection.
Finally, enforcement of the confidentiality provision would be unreasonably burdensome to Tu. Employees have a right to use and expand their aptitude, skill, mental abilities, and such other subjective knowledge they obtain while in the course of their employment. SI Handling Sys., supra, 753 F.2d at 1255; Midland–Ross Corp., 293 F.2d at 412. Prohibiting employees from utilizing their talents would make specialists in certain aspects of a business enterprise “virtual hostages” of their employers. Reed, supra, 353 N.E.2d at 594. Through years of work in graduate school, post-graduate appointments, and positions in the pharmaceutical industry, Tu developed an expertise in controlled release liquid formulations. The confidentiality provision of his employment agreement with plaintiff does not prevent him from seeking other employment in his field, nor does it preclude him from working on other types of formulations. But, if enforced, it would preclude him from working in the area that has become his specialty. Denying him the right to expand his ability and knowledge of controlled release liquid technology is unduly burdensome.
In sum, the confidentiality provision is unenforceable under New York law because it is overly restrictive in time and scope, does not further a legitimate business interest, is contrary to established public policy, and is unduly burdensome on Tu. For these reasons, the Chancery judge's grant of summary judgment in favor of defendants, and the dismissal of plaintiff's complaint, was a correct resolution of the case as a matter of law.
Having reached this conclusion, we address only briefly plaintiff's other arguments. Although full discovery had not been completed, the Chancery judge did not abuse his discretion in hearing and deciding defendant's summary judgment motion based on the purely legal question of enforceability under New York law. There was no dispute about the language of the confidentiality agreement, and plaintiff had provided under seal a description of the confidential information it alleged had been unfairly used to develop the competitive product. Plaintiff had abandoned its claim of misappropriation of its trade secrets. No showing was made of any further discovery that would have aided the court's determination of the scope and effect of the applicable law in this case. See Wellington v. Estate of Wellington, 359 N.J.Super. 484, 496 (App.Div.), certif. denied, 177 N.J. 493 (2003); Auster v. Kinoian, 153 N.J.Super. 52, 56 (App.Div.1977).
We do not find sufficient merit to warrant discussion in a written opinion, Rule 2:11–3(e)(1)(E), in plaintiff's argument that its due process rights were violated by simultaneous briefing of remaining issues after oral argument on summary judgment rather than allowing it to respond to defendants' brief.
Finally, we reject defendants' responding argument that the summary judgment order was not a final judgment appealable as of right because the Chancery Division never ruled on plaintiff's motion to file an amended complaint.
1. FN1. By stipulation, the other two corporate defendants were dismissed from the case without prejudice in November 2010.
2. FN2. We will refer to the corporate entities that were Tu's former employers simply as UCB or plaintiff.
3. FN3. Reverse engineering refers to “starting with the known product and working backward to divine the process which aided in its manufacture.” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476, 94 S.Ct. 1879, 1883, 40 L. Ed.2d 315, 322 (1974).
4. FN4. An “authorized generic” is the same product as the name brand, often off the same production line, but it is distributed with a generic label by a wholly-owned subsidiary of the name brand company.
5. FN5. UCB contends that its agreement to dismiss its trade secret claim does not preclude it from arguing that the information divulged by Tu included trade secrets. Despite that contention, it then explains that “here, UCB is simply arguing that its Confidential Information is subject to a breach [of] contract claim, not that it is a trade secret.”