PHIO Pharmaceuticals Corp. v. Khvorova

          MEMORANDUM AND ORDER

          DENISE J. CASPER UNITED STATES DISTRICT JUDGE

         I. Introduction

         Plaintiff Phio Pharmaceuticals Corp. f/k/a RXi Pharmaceuticals Corporation (“RXi”) has filed this lawsuit against Defendant Anastasia Khvorova (“Khvorova”) alleging misappropriation of trade secrets in violation of the Defend Trade Secrets Act, 18 U.S.C. §§ 1836-39 (Count I), Massachusetts Trade Secrets Act (Count II) and Mass. Gen. L. c. 93, §§ 42-42A (Count III); breach of fiduciary duties (Count IV); breach of contract (Count V); and unfair competition in violation of Mass. Gen. L. c. 93A, § 11 (Count VI). D. 18. Khvorova has moved to dismiss under Fed.R.Civ.P. 12(b)(7). D. 21. For the reasons stated below, the Court DENIES the motion.

         II. Standard of Review

         Pursuant to Rule 12(b)(7), a party may move for dismissal of an action for failure to join a party under Rule 19. Fed.R.Civ.P. 12(b)(7). The Court conducts a two-part inquiry to determine whether a party must be joined under Rule 19. See Picciotto v. Cont'l Cas. Co., 512 F.3d 9, 15 (1st Cir. 2008). First, the Court must decide whether a party is necessary under Rule 19(a). United States v. San Juan Bay Marina, 239 F.3d 400, 405 (1st Cir. 2001). If a party is a necessary one, the Court must then ask whether joinder is feasible. Fed.R.Civ.P. 19(a). If joinder is not feasible, then the second determination that must be made under Rule 19(b) is whether the party is indispensable such that, “in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Fed. R. Civ. P. 19(b). “[T]he moving party carries the burden of showing why an absent party should be joined.” Raytheon Co. v. Cont'l Cas. Co., 123 F.Supp.2d 22, 32 (D. Mass. 2000).

         “As with Rule 12(b)(6) motions, a court must accept the allegations contained in the plaintiff's complaint as true for the purpose of the Rule 12(b)(7) inquiry.” McCaskill v. Gallaudet Univ., 36 F.Supp.3d 145, 151 (D.D.C. 2014); Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 479 n.2 (7th Cir. 2001) (stating that “[f]or purposes of a motion to dismiss for failure to join a party under Rule 19, we accept the allegations in the complaint as true”). However, “a court is ‘not limited to the pleadings' and may consider ‘other relevant extra-pleading evidence.'” Phoenix Ins. Co. v. Delangis, CIV.A. No. 14-10689-GAO, 2015 WL 1137819, at *2 (D. Mass. Mar. 13, 2015) (quoting Axis Ins. Co. v. Hall, 287 F.R.D. 110, 113 (D. Me. 2012)).

         III. Factual Background

         Unless otherwise noted, the following facts are based upon allegations in RXi's amended complaint, D. 18, and are accepted as true for consideration of the motion to dismiss. RXi is a Massachusetts-based pharmaceutical company that has contributed to the development of ribonucleic acid interference (“RNAi”), a compound that can destroy selected sequences of ribonucleic acids (“RNA”). D. 18 ¶¶ 2-3, 15. RNAi has vast potential to treat and cure numerous diseases and conditions, including Alzheimer's Disease, inflammatory diseases, macular degeneration and heart disease. Id. ¶ 2. RXi has patented and performed six clinical studies with a self-delivering RNAi called sd-rxRNA® compound, which is notable for (among other things) its exceptional half-life. Id. ¶¶ 3, 6. Features of sd-rxRNA® are described in U.S. Patent No. 8, 796, 443 (“'443 Patent”), id. ¶ 6, which was assigned to RXi and lists Khvorova as lead inventor, see D. 18-1 at 2.

         A. Khvorova's Employment at RXi

         In connection with its RNAi work, RXi hired Khvorova as its Chief Scientific Officer in 2008. D. 18 ¶ 7. She was promoted to Senior Vice President and Chief Scientific Officer on September 24, 2011. Id. As part of the conditions of her employment, Khvorova agreed not to disclose or use in an unauthorized manner any RXi confidential information acquired over the course of her employment. Id. ¶¶ 24-26, 28-32. Khvorova's employment agreements from 2008 and 2011 indicated that the restrictions on use of confidential information continued to apply after her employment terminated. Id. ¶¶ 26, 31. Concurrently with the execution of the 2011 Employment Agreement, Khvorova assigned to RXi certain intellectual property she developed while working at a different company and agreed that the technology disclosed in those assignments was subject to the same confidentiality provisions as in her RXi employment agreements. Id. ¶¶ 33-34. Khvorova received cash, stock, stock options and future cash payments valued in the millions of dollars (at the time) in exchange for these assignments to RXi. Id. ¶ 33.

         On November 8, 2011, Khvorova allegedly sent confidential information detailing RXi's methodology for the developmental testing of RNAi to her personal email account. Id. ¶ 36. On or between February 24 and 26, 2012, Khvorova downloaded “massive” amounts of RXi data and experimental findings, which triggered an internal investigation into Khvorova's download activity. Id. ¶ 37. Khvorova and RXi entered into a separation agreement shortly thereafter. Id. ¶ 38. Pursuant to the terms of the separation agreement, Khvorova assigned certain intellectual property rights to RXi and acknowledged her continued obligation not to disclose RXi confidential information. Id. ¶¶ 38-39.

         B. Alleged Post-Termination Disclosure of Confidential Information

         On or before April 22, 2013, Khvorova began working for the University of Massachusetts Medical School (“UMass”), one of RXi's competitors in the field of pharmaceutical RNAi research and development. Id. ¶ 47. During her employment with UMass, RXi sent Khvorova reminders regarding her confidentiality obligations with respect to RXi's intellectual property. See id. ¶ 53. In December 2015, Dr. Khvorova's laboratory released an article titled “Hydrophobically Modified siRNAs Silence Huntington mRNA in Primary Neurons and Mouse Brain, ” which described the utility of an RNAi molecule that RXi describes as “strikingly similar” to its sd-rxRNA®. Id. ¶ 51. On November 3, 2016, Khvorova was named as an inventor on U.S. Patent application 15/089423 (the “'423 Application”). Id. ¶¶ 12, 52; D. 22-1 at 4.^[1] In April 2016, Khvorova and her co-inventors assigned the '423 Application to UMass. D. 22-1 at 266, 268-69. The '423 Application allegedly describes a class of RNAi molecules possessing the same non-public experimental features of sd-rxRNA®. D. 18 ¶ 52. RXi and Khvorova were investigating these molecules during her tenure at RXi. Id.

         On July 5, 2017, RXi submitted an assignment document indicating that Khvorova assigned the '423 Application to RXi. D. 22-1 at 270-73. The document was signed by Geert Cauwenbergh purportedly as power of attorney on behalf of Khvorova. Id. at 273. On August 23, 2017, however, UMass filed a declaration with the United States Patent and Trademark Office (“USPTO”) clarifying ...