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Frequency Theapeutics, Inc. v. Weber

Superior Court of Massachusetts, Suffolk, Business Litigation Session

November 28, 2018

FREQUENCY THEAPEUTICS, INC.
v.
Peter WEBER, M.D. et al.

          MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION

          Janet L. Sanders, Justice of the Superior Court

          Frequency Therapeutics, Inc. (Frequency), brings this action against its former employee Peter Weber, M.D. (Weber) and his new employer Decibel Therapeutics, Inc. (Decibel) seeking among other things to enforce noncompetition and nondisclosure agreements between it and Weber. Frequency asserts claims against Weber for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and misappropriation of trade secrets. As to Decibel, Frequency asserts claims for tortious interference with contractual and advantageous business relations and a violation of Chapter 93A. On November 13, 2018, this case came before the Court on Frequency’s Motion for a Preliminary Injunction. In a margin endorsement, this Court allowed the motion. This memorandum sets forth the reasons for that decision.

         BACKGROUND

         The pleadings, affidavits, and exhibits submitted by the parties reveal the following facts, which provide the basis for this Court’s order.

         Frequency is a healthcare technology company aimed at discovering and developing new medicines to treat hearing disorders. Among those treatments is a therapy to regrow sensory hair cells in the inner ear. Frequency has also reached the clinical stage in its development of small molecule drugs that activate progenitor cells within the body to restore healthy tissue, including hair cells, and has been working to develop other hearing loss therapies aimed at hearing protection and repair. Frequency has received grants from the U.S. Department of Defense and is in contract discussions with the Cystic Fibrosis Foundation to treat patients with hearing loss caused by antibiotic treatment.

         Like Frequency, Decibel is a healthcare technology company focused on discovering ways to treat hearing loss. As one Frequency executive states, Decibel is Frequency’s "primary and most well-funded competitor in the business of developing pharmaceutical therapies for the treatment of hearing loss through the use of regenerative technology, gene therapy and other technologies." Affidavit of Christopher Loose, Ph.D. (Loose Aff.) ¶ 5. Decibel’s President describes the focus of the company a bit differently, pointing out that it does not currently have a cochlear hair cell regeneration program similar to that at Frequency nor is that its emphasis. Affidavit of Steven Holtzman (Holtzman Aff.) ¶¶ 8-9. Still, its mission is to "protect, repair and restore hearing" with programs aimed both at patients who are at risk of experiencing hearing loss and patients who are either born deaf or have suffered some hearing damage. Holtzman Aff. ¶¶ 5-7. Clearly, Decibel and Frequency are competitors in the hearing loss field.

         In November 2016, Frequency hired Weber to be its first Chief Medical Officer (CMO). Weber is a medical doctor and a prominent specialist in otolaryngology, a surgical sub-specialty that deals with ear, nose, and throat conditions. At the time of his hiring, Weber signed two agreements: a Non-Competition and Non-Solicitation Agreement (the Non-Competition Agreement) and a Non Disclosure Agreement (NDA). See Exhibits A and B to Affidavit of David Lucchino (Lucchino Aff.). The Non-Competition Agreement provided that Weber, for a period of one year after the termination of his employment, shall not:

... engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise ...) that is competitive with [Frequency’s] business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed, manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by [Frequency] while [Weber] was employed by [Frequency].

See Exhibit A, § 1(a). In the NDA, Weber agreed not to disclose any proprietary information of the company or to remove such information from company premises expect in the pursuit of Frequency business. He also acknowledged that any such information in his possession at the time of his termination would be promptly returned. See Exhibit B, § 2(b).

         Weber’s responsibilities as Frequency’s CMO are outlined in the Affidavit of Christopher Loose, one of Frequency’s founders and its Chief Scientific Officer. Loose worked closely with Weber during his tenure at the company. According to that affidavit (which is not directly contradicted by any evidence submitted by the defendants), Weber’s responsibilities at Frequency were not limited to any single category of hearing loss therapy. They included: formulating strategies for translating Frequency’s proprietary technologies into clinical trials, advising the company in its negotiations with the Food and Drug Administration, and exploring new biomarkers and non-sound booth tests for hearing. ¶ 8, 10 Loose Aff. In April 2018, he was involved in confidential discussions regarding Frequency’s ability to identify and implement the first biomarker for noise-induced hearing loss. ¶ 9 of Loose Aff. He served as principal investigator on a grant for a clinical study of hearing loss therapy for cystic fibrosis patients. Id. He attended meetings concerning Frequency’s use of Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR) gene editing technology. ¶ 11 of Loose Aff.

         As a consequence of his job responsibilities, Weber had access to Frequency’s most sensitive, proprietary and commercially valuable confidential information and trade secrets. ¶¶ 12-13 of Loose Aff. That included knowledge about the design and implementation of Frequency’s clinical studies, the results garnered from its clinical trials, and the fruits of Frequency’s research into various hearing loss therapies. More generally, Weber participated in high level meetings discussing Frequency’s business plans in the hearing loss treatment industry, including where and how the company should invest its resources. ¶ 13 of Loose Aff. All of this information is not known outside of Frequency, and would be commercially valuable to competitors, including Decibel. ¶ 14 of Loose Aff.

         On February 16, 2018, Steven Holtzman, Chief Executive Officer of Decibel, sent Weber an email introducing himself. By this time, Weber was feeling increasingly marginalized at Frequency because, in his view, its focus had shifted, with more and more of its work in the area of cell regeneration. In the February 16 email, Holtzman mentioned this change in focus and, despite his reluctance to "come across as ‘poaching’ from Frequency," asked if Weber was interested in a position at Decibel. Weber expressed an interest in a return email and the two met on March 15, 2018. On April 26, 2018, Decibel offered Weber a position at the company.

         Weber informed Frequency’s CEO of his plan to accept the offer on May 8, 2018. Lucchino reminded Weber of the Noncompetition Agreement and the NDA. Separately, Lucchino launched an investigation into Weber’s downloading activity relating to Frequency’s confidential information and discovered that there had been a substantial increase in that activity after the February 16 email from Holtzman. That activity did not appear to relate to any work that Weber was doing at the time. Weber informed Lucchino on May 31, 2018 that he was resigning from Frequency and was promptly notified of his obligation to return any documents containing Frequency’s confidential information. In light of the findings regarding Weber’s downloading activity, Frequency’s counsel also demanded access to Weber’s computers to determine whether the downloaded materials had been shared with Decibel. Such access was eventually given after ...


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