United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE
June 2009 through April 2010, Plaintiff CardiAQ Valve
Technologies, Inc. (“CardiAQ”) hired Defendant
Neovasc Inc. (“Neovasc”) to help construct
prototypes of CardiAQ's transcatheter mitral valve
implant (“TMVI”) device. CardiAQ alleges that
Neovasc breached the parties' non-disclosure agreement
(“NDA”) and misappropriated CardiAQ's trade
secrets by using CardiAQ's confidential information to
develop its own competing TMVI device. On May 19, 2016,
following a two-week trial, a jury found for CardiAQ as to
some, though not all, of its claims. The jury returned a
verdict finding that Neovasc: (1) breached the NDA; (2)
breached the duty of honest performance in the NDA; and (3)
misappropriated three of CardiAQ's six claimed trade
secrets. [ECF No. 483]. The jury awarded CardiAQ $70, 000,
000 in damages for Neovasc's theft of trade secrets, with
no additional damages for the contract breaches.
Court has already resolved several post-trial motions. On May
27, 2016, the Court granted Neovasc's motion for judgment
as a matter of law with respect to CardiAQ's Chapter 93A
claim, finding that Neovasc's alleged wrongful acts had
not occurred “primarily and substantially within the
commonwealth” of Massachusetts, as is required under
the statute. Mass. Gen. L. Ch. 93A, § 11. [ECF No. 495].
On July 28, 2016, the Court denied both parties' renewed
motions for judgment as a matter of law with respect to
CardiAQ's duty of honest performance claims, declining to
overturn the jury's finding that Neovasc had breached the
duty of honest performance with regard to the NDA, but not
with the parties' purchase orders. [ECF No. 529].
August 15, 2016, the Court held oral argument on the
remaining post-trial motions: CardiAQ's motions for
enhanced damages and injunctive relief [ECF Nos. 513, 516] as
well as Neovasc's motions for a new trial on damages and
trade secrets 4-6 [ECF Nos. 511, 520]. The Court also heard
argument on CardiAQ's inventorship claim, which was left
for the Court rather than the jury to decide.
on October 19, 2016, in anticipation of an appeal, Neovasc
filed motions and a supporting memorandum [ECF Nos. 571-574]
seeking the Pro Hac Vice admission of three
additional attorneys. CardiAQ opposed the motions on October
24, 2016 [ECF No. 578].
Order resolves all of the outstanding motions, as well as
CardiAQ's inventorship claim. For the reasons stated
herein: (1) CardiAQ's motion for enhanced damages [ECF
No. 513] is GRANTED IN PART; (2) CardiAQ's motion for
injunctive relief [ECF No. 516] is GRANTED IN PART; (3)
Neovasc's motion for a new trial on damages [ECF No. 522]
is DENIED; (4) Neovasc's motion for a new trial on trade
secrets 4-6 [ECF No. 521] is DENIED; (5); Dr. Quadri and Mr.
Ratz are to be added as co-inventors of U.S. Patent No. 8,
579, 964; and (6) Neovasc's motions for the Pro Hac
Vice admission of new attorneys [ECF Nos. 571-573] are
DENIED as MOOT.
original complaint, filed on June 6, 2014 [ECF No. 1], as
well as its amended complaint, filed on January 15, 2015 [ECF
No. 64], CardiAQ brought the following seven claims against
Neovasc: (1) correction of inventorship under 35 U.S.C.
§ 256; (2) breach of the NDA; (3) breach of the implied
covenant of good faith and fair dealing in the NDA and
purchase orders; (4) fraud; (5) misappropriation of trade
secrets under Mass. Gen. L. ch. 93 §§ 42, 42A and
the common law; (6) violation of Mass. Gen. L. ch. 93A §
11; and (7) injunctive relief.
April 2016, the Court granted Neovasc's motion for
summary judgment as to the fraud count, finding that Neovasc
did not have an affirmative duty to disclose its competitive
activities to CardiAQ, and therefore did not commit fraud by
failing to disclose such activity once it began. [ECF No.
417]. The Court, however, denied Neovasc's motion for
summary judgment as to the inventorship and Chapter 93A
next month, this action proceeded to trial. Over the course
of the two-week trial, the two founders of CardiAQ-Brent Ratz
and Dr. Arshad Quadri-testified, as did Rob Michiels, the
former CEO of CardiAQ; Randy Lane, Vice President of Research
and Development at Neovasc; and Alexei Marko, CEO of Neovasc.
The jury also heard the deposition of testimony of several
fact witnesses that were not present at trial, including:
Colin Nyuli, an intellectual property manager and former
project engineer at Neovasc; Krista Neale, the manager of new
technology development and former project engineer at
Neovasc; Kathleen Hung, a project manager at Neovasc; Dr.
Michael Mack, a former member of CardiAQ's scientific
advisory board; and Glen Rabito, a senior manager of research
and development at Edwards Lifesciences and a former
engineering manager and research and development project
leader at CardiAQ.
addition, three experts testified for CardiAQ. Dr. Joseph
Bavaria, Vice Chairman of the Department of Cardiovascular
Surgery at the University of Pennsylvania and Director of the
Transcatheter Valve Program at the University of
Pennsylvania, testified as to the anatomy of the heart and
specifically, the mitral valve. Dr. Rick Hillstead, a Fellow
on the Council of Clinical Cardiology within the American
Heart Association, testified generally about the development
of medical devices and the customs and practices of vendors,
suppliers, and development houses in the medical device
field. Finally, Michael J. Wagner, the managing director at
Litinomics, Inc., a financial and economic consulting firm,
testified as to damages, opining that the reasonable royalty
Neovasc owed to CardiAQ was $90 million, based on a
hypothetical negotiation taking place in 2010. Three experts
also testified for Neovasc. Steven Little, a cardiologist at
Houston Methodist Hospital and the medical director of its
valve clinic, testified regarding cardiac imaging and the
anatomy of the mitral valve, as well as the interaction of
CardiAQ's and Neovasc's respective devices within the
native mitral valve anatomy. Karl R. Leinsing, a mechanical
engineer who develops medical devices, testified regarding
CardiAQ's trade secret claims and Neovasc's Tiara
development. Lastly, Carla Mulhern, managing principal in the
Washington D.C. office of Analysis Group, testified as to
damages, and opined that correcting for various errors in Mr.
Wagner's analysis, the appropriate royalty figure was no
more than $2 million.
jury returned a split verdict. [ECF No. 483]. The verdict
form contained eight questions. The first four concerned
CardiAQ's breach of contract claims. The jury was asked
to determine whether CardiAQ had proven, by a preponderance
of the evidence that Neovasc had: (1) breached the NDA; (2)
breached the duty of honest performance in the NDA; and (3)
breached the duty of honest performance in the purchase
orders. If the jury answered yes to any of these three
questions, they were instructed to then determine the amount
of money CardiAQ should receive for Neovasc's breach(es).
The jury answered yes to the first two questions, but no to
the third: Neovasc had breached the NDA as well as the duty
of honest performance in the NDA, but not the purchase
orders. As to the fourth question, the jury found that
CardiAQ should not receive any money for Neovasc's
the jury was asked to determine if Neovasc had
misappropriated CardiAQ's trade secrets. At trial,
CardiAQ maintained that Neovasc had misappropriated six of
its trade secrets, and the verdict form asked the jury to
make a separate finding as to each one. The six alleged trade
secrets were originally identified by CardiAQ during
discovery, and were described in trial exhibit 1157. The
alleged trade secrets were:
1. CardiAQ's Rev. C Prototype Design [Tr. Ex. 1157 at
2. CardiAQ's Rev. D Prototype Design [Tr. Ex. 1157 at
3. CardiAQ's Rev. E Prototype Design [Tr. Ex. 1157 at
4. A transcatheter replacement mitral valve prosthesis design
that includes an expandable metal frame for supporting a
tricuspid, one-way valve, the expandable metal frame sized
for placement in a human native mitral valve space, where the
prosthesis is configured for mitral valve implantation
without relying exclusively on radial force but rather by
engaging the native mitral valve annulus on the atrial side
of the native mitral valve and by anchoring the prosthesis on
the ventricular side of the native mitral valve annulus [Tr.
Ex. 1157 at 14-17];
5. The CardiAQ Mandrel [Tr. Ex. 1157 at 18]; and
6. CardiAQ's Transcatheter Mitral Valve Implantation
Development History [Tr. Ex. 1157 at 18].
jury found that that Neovasc had misappropriated trade
secrets 4-6, but not trade secrets 1-3, and that CardiAQ
should receive $70 million as damages for Neovasc's
jury was also asked to make factual determinations with
respect to the two counts- inventorship and Chapter
93A-reserved for the Court. The jury found that CardiAQ had
proven (1) by a preponderance of the evidence that Neovasc
engaged in unfair and deceptive acts or practices; and (2) by
clear and convincing evidence that the two founders of
CardiAQ contributed to the conception of Neovasc's U.S.
Patent No. 8, 579, 964 (the “‘964 Patent”).
is a summary of facts adduced at trial that are relevant to
the outstanding issues in this case:
and CardiAQ's business relationship began on June 4,
2009, after Brian McPherson, the Vice President of Operations
and President of the Surgical Products division at Neovasc,
sent an unsolicited email to CardiAQ co-founder Brent Ratz
advertising Neovasc's products and services. [Tr. Day 3,
183:7-20; Tr. Ex. 349]. The email stated that Neovasc was the
only supplier of “custom pericardial tissue actively
supporting companies developing minimally invasive heart
valves, ” and that he was confident CardiAQ could
benefit from Neovasc's services. [Tr. Ex. 349] Mr.
McPherson attached a 15-page presentation to the email,
describing Neovasc's services. Id. at 3-17.
Ratz responded that same day to indicate his interest in
learning more about Neovasc. [ECF No. 304-7 at 32]. Before
speaking with Mr. McPherson about a potential business
relationship, Mr. Ratz suggested that the parties execute a
Non-Disclosure Agreement. Id. Mr.
emailed Mr. McPherson CardiAQ's standard agreement, and
Mr. McPherson responded that he would rather use
Neovasc's. Id. On June 4, 2009, the parties
executed Neovasc's NonDisclosure Agreement (the
“NDA”), agreeing that the recipient of
“Confidential Information” could not use or
disclose such information for “any purpose other than
evaluating the proposed business relationship.” [Tr.
Ex. 371]. The parties agreed that the recipient of
Confidential Information could not “directly or
indirectly, disclose any Confidential Information to any
third party or use the Confidential Information for its own
benefit or for the benefit of any third party.”
Id. The NDA had a five-year term, and was governed
by the laws of the Province of British Columbia. Id.
The NDA was executed via email and signed by Mr. Ratz and
Neovasc CEO Alexei Marko. [Tr. Day 3, 188:1-14; Tr. Ex. 371].
time Mr. McPherson reached out to CardiAQ, CardiAQ was a
start-up developing a TMVI device-a prosthetic heart valve
delivered through a catheter to replace a malfunctioning
native mitral valve. Mitral regurgitation, one of the most
common forms of heart disease, can be treated by replacing
the mitral valve, but, currently, the only way to replace the
mitral valve is through open heart surgery. By June 2009,
CardiAQ, had developed a prototype of its TMVI device,
intended to replace the mitral valve through a catheter
procedure, rather than open heart surgery.
device consists of three elements: the frame, the delivery
catheter, and the tissue valve. [Tr. Day 3, 15:20-23].
Between June 2009 and April 2010, Neovasc worked with CardiAQ
to manufacture the tissue valve element. [Tr. Day 3, 16:1-3].
During this time, CardiAQ and Neovasc entered into several
purchase orders (the “Purchase Orders”), in which
they agreed to the work Neovasc would perform. [See e.g., ECF
No. 64, Ex. D]. CardiAQ would send metal frames to
Neovasc's Vancouver facility [Tr. Day 4, 36:15-37:2; Tr.
Ex. 1205], and Neovasc would attach tissue to the frame and
assemble the final TMVI prototype. [Tr. Day 3, 24:23-25:2;
Tr. Day 3, 35:1-2; Tr. Day 4, 26:1-3]. CardiAQ used the
prototypes assembled by Neovasc for several animal studies.
[Tr. Day 3, 25:3-9; Tr. Day 4, 48:10-12].
the course of the 10-month relationship, Mr. Ratz regularly
exchanged emails and phone calls with Neovasc employees.
Through these emails and phone calls, Neovasc employees,
including engineer Randy Lane, learned about the
specifications, ongoing animal testing, and development
history of CardiAQ's TMVI device. [See e.g.,
Exs. 1171; 1179; 1193; 1197; 1214]. During this time, CardiAQ
sent frames of its Rev. C, D, and E prototypes to Neovasc,
which then attached the tissue valve element. [Tr. Day 3,
209:24-211:24; Tr. Day 4, 27:10-25; Tr. Day 4, 36:15-37:25].
October 20, 2009, in the middle of CardiAQ and Neovasc's
business relationship, Mr. Lane drew the first sketch of what
would become Neovasc's own TMVI device, now known as the
“Tiara.” [Tr. Day 8, 99:10-12; Day 9, 67:9-17;
Tr. Ex. 1121]. After sketching the concept in his lab
notebook, Mr. Lane told Neovasc's CEO Alexi Marko about
the idea [Tr. Day 8, 100:11-21], and Mr. Marko instructed Mr.
Lane to proceed with an in-house mitral valve program, which
he did. [Tr. Ex. 343; Tr. Day 8, 122:9-123:11]. Mr. Marko
advised Mr. Lane not to tell CardiAQ about Neovasc's
internal project, explaining in an October 21, 2009 email
that, “when appropriate we may need to disclose to
[CardiAQ] that we are working on something, but let's
cross that bridge when we come to it.” [Tr. Ex. 343].
and CardiAQ's business relationship ended in April 2010,
after CardiAQ leased its own manufacturing facility in
California and no longer needed Neovasc's services. [Tr.
Day 4, 46:9-16; Tr. Day 7, 119:14-25; Tr. Day 9, 107:19-22].
Until Neovasc's relationship with CardiAQ ended in April
2010, Mr. Lane worked on both Neovasc's internal TMVI
project and CardiAQ's valve assembly. [Tr. Day 9,
113:10-19]. Mr. Lane used the same lab notebook to document
his development of Neovasc's valve and his assembly of
CardiAQ's valve, at times including notes on adjacent
pages. [Tr. Ex. 1121]. Neovasc did not restrict any of its
engineers from working on both the Tiara project and the
CardiAQ project, and several did. [Tr. Day 9, 113:14- 24].
December 2009, Neovasc began to prepare its first patent
application relating to the Tiara design. [Tr. Day 9,
107:23-108:5]. Neovasc filed the application on May 5, 2010
[Tr. Day 9, 107:23-25], naming Mr. Lane as the sole inventor.
[Tr. Ex. 2756]. The U.S. Patent Office issued the ‘964
Patent on November 12, 2013, naming Mr. Lane and Colin Nyuli,
a Neovasc employee who joined Neovasc in September 2010, as
joint inventors. [Tr. Ex. 115]. The ‘964 Patent is a
method patent for a transcatheter mitral valve prosthesis.
formally announced its internal TMVI project in a June 20,
2011 press release. [Tr. Ex. 347; Tr. Day 9, 206:11-17].
Since then, Neovasc's device has been implanted in over
100 animals. [Tr. Ex. 2533 at 57]. On February 3, 2014,
Neovasc announced the first in-human implantation of its
device by physicians at St. Paul's Hospital in Vancouver.
[Tr. Ex. 2315]
never told CardiAQ about its internal TMVI program. [Tr. Day
4, 51:14-18; Tr. Day 9, 112:23-113:1]. Mr. Ratz and Dr.
Quadri first learned of Neovasc's development of a TMVI
device in December 2011, after Neovasc's patent
application became public. [Tr. Day 3, 68:2-23; Day 4,
51:19-25]. Soon thereafter, in February 2012, counsel for
CardiAQ contacted Mr. Marko to express concern that Neovasc
may have incorporated CardiAQ's confidential information
into its Tiara device, in violation of the NDA. [Tr. Ex.
1389]. In June 2014, after counsel for the parties exchanged
multiple letters [see, e.g., Tr. Exs. 188, 1272,
2482], CardiAQ filed the instant action. Neither
CardiAQ's nor Neovasc's TMVI devices have received
regulatory approval, and both are currently in the clinical
two pending motions request enhanced damages [ECF No. 513]
and injunctive relief [ECF No. 516] in addition to the $70
million already awarded by the jury. The motion for enhanced
damages asks the Court to double the jury's $70 million
damages award. The motion for injunctive relief requests that
the Court order Neovasc to: (1) destroy all information that
CardiAQ sent to Neovasc between June 2009 and April 2010; (2)
return to CardiAQ any CardiAQ prototypes, or portions
thereof, that CardiAQ provided to Neovasc and that Neovasc
still has in its possession, custody, or control; (3) without
the written consent of CardiAQ, not prosecute claims covering
subject matter that is either described in CardiAQ's
Trade Secret Number 4, or described in claims of U.S. Patent
No. 8, 579, 964, for which the Court determines Dr. Quadri
and Mr. Ratz significantly contributed; and (4) with certain
limitations, suspend all of its TMVI programs, including, but
not limited to, its Tiara program, for eighteen months.
oral argument, CardiAQ submitted a supplemental memorandum
regarding both motions [ECF No. 562], in which it suggested
that the Court issue an injunction with contingencies, for
example, that the injunction be contingent on whether or not
Neovasc satisfies the $70 million verdict and further argued
that the Court should enhance damages by at least 33%, or
$23.3 million. Neovasc responded to the supplemental
memorandum on September 8, 2016. [ECF No. 567].
Motion for Enhanced Damages
request for enhanced damages arises under Mass. Gen. L. ch.
93, § 42, which states that:
Whoever embezzles, steals or unlawfully takes, carries away,
conceals, or copies, or by fraud or by deception obtains,
from any person or corporation, with intent to convert to his
own use, any trade secret, regardless of value, shall be
liable in tort to such person or corporation for all damages
resulting therefrom. Whether or not the case is tried by
a jury, the court, in its discretion, may increase the
damages up to double the amount found. The term
‘‘trade secret'' as used in this section
shall have the same meaning as is set forth in section thirty
of chapter two hundred and sixty-six.
Gen. L. ch. 93, § 42 (emphasis added). This provision,
which gives the Court discretion to double the jury's
damages award in a trade secret case, has been applied
sparingly in both state and federal court. In Data Gen.
Corp. v. Grumman Sys. Support Corp., 825 F.Supp. 340,
343 (D. Mass. 1993), the court added $9, 000, 000 to the
jury's $27, 417, 000 award after finding that
defendant's misappropriation of trade secrets had been
willful. In USM Corp. v. Marson Fastener
Corp., 467 N.E.2d 1271, 1276-77 (Mass. 1984), the
Massachusetts Supreme Judicial Court (“SJC”) held
that enhanced damages were inappropriate, where the jury had
awarded damages based on defendant's profit (i.e. unjust
enrichment) rather than plaintiff's lost profit. The SJC
found that “[t]he reference to damages ‘resulting
from' a defendant's tortious act concerns the trade
secret holders' loss of profit, and not, as here, a
defendant's profit at a plaintiff's expense.”
Id. at 1285.
argues that enhanced damages are precluded by the SJC's
decision in USMCorp. “Absent damages
for lost profits, ” according to Neovasc,
“[CardiAQ] has no basis to seek a new, novel
construction of Ch. 93 § 42 inconsistent with the
holding in USM.” [ECF No. 534 at 4]. CardiAQ
counters that USM is inapposite, since it did not
involve an award for reasonable royalties. The USM
holding, according to CardiAQ, should be limited to cases in
which the jury's award disgorged the defendant's