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Integrated Genomics, Inc. v. Kyrpides

March 4, 2008

INTEGRATED GENOMICS, INC., PLAINTIFF,
v.
NIKOS KYRPIDES AND NATALIA IVANOVA, DEFENDANTS.



The opinion of the court was delivered by: Judge Joan H. Lefkow

MEMORANDUM OPINION AND ORDER

Magistrate Judge Keys

Plaintiff, Integrated Genomics, Inc. ("Integrated Genomics") filed a four-count amended complaint against defendants Nikos Kyrpides ("Kyrpides") and Natalia Ivanova ("Ivanova") (together, "defendants") alleging (1) breach of a covenant not to compete, (2) breach of a duty of loyalty, (3) tortious interference with prospective economic advantage, and (4) common law unfair competition. Defendants have moved to dismiss the amended complaint on the basis of a lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) and for failure to state a claim upon which relief may be granted under Fed. R. Civ. P. 12(b)(6). For the following reasons, their motions [#31, #33] are granted in part and denied in part.

I. Facts

The following facts are taken from Integrated Genomics' amended complaint. Dkt. No. 30. Integrated Genomics is a company that develops software for analyzing genomes. Amended Complaint, at ¶ 12. A genome is an organism's full set of chromosomes: all of its inheritable traits. American Heritage Dictionary (4th Ed. 2006), available at http://dictionary.reference.com/browse/genome. Kyrpides was hired by Integrated Genomics in 1999 as an annotator of its ERGOTM bioinformatics software. Amended Complaint, at ¶¶ 13, 20. Over the course of his employment with Integrated Genomics, Kyrpides was ultimately promoted to Director of Bioinformatics. Amended Complaint, at ¶ 14. "Bioinformatics" means "[t]he use of computer science, mathematics, and information theory to model and analyze biological systems, especially systems involving genetic material." American Heritage Science Dictionary (2002), available at http://dictionary.reference.com/browse/bioinformatics. Ivanova was hired by Integrated Genomics in 1999 as a research scientist. Amended Complaint, at ¶ 27. She eventually became a principal assistant to Kyrpides. Amended Complaint, at ¶ 33.

By virtue of their employment with Integrated Genomics, Kyrpides and Ivanova both had access to and worked to develop confidential information and trade secrets for Integrated Genomics. Amended Complaint, at ¶¶ 15, 28. They both signed employment agreements, which contained identical covenants not to compete and not to disclose proprietary information:

6. Non-Compete.

(a) During the Employment Period and for a period of two years after the termination or expiration thereof, the Employee will not directly or indirectly:

(i) As an individual proprietor, partner, stockholder, officer, employee, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1%) of the total outstanding stock of a publicly held company), engage in the business of developing, producing, marketing or selling products or services which would compete with products or services of the kind or type developed or being developed, produced, marketed or sold by the Company, or planned to be produced, marketed, or sold as described in any business plan of the Company or as set forth in any notes or minutes of internal Company meetings, while the Employee was employed by the Company; or

(ii) recruit, solicit or induce, or attempt to induce, any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company; or

(iii) solicit, divert, or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company which were contacted, solicited or served by the Employee while employed by the Company.

(b) If any restriction set forth in this Section 6 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(c) The restrictions contained in this Section 6 are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable for such purpose. The Employee agrees that any breach of this Section 6 will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief.

7. Proprietary Information and Developments.

7.1 Proprietary Information.

(a) Employee agrees that all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company's business or financial affairs (collectively, "Proprietary Information") is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, clinical data, financial data, personnel data, computer programs, and customer and supplier lists. Employee will not disclose any Proprietary Information to others outside the Company or use the same for any unauthorized purposes without written approval by an officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge without fault by the Employee.

Exs. A and C to Amended Complaint.

Kyrpides worked for Integrated Genomics from 1999 until he resigned in April of 2004. Amended Complaint, at ¶¶ 21-23. During that time he received a salary and benefits worth between $84,000 and $120,000 per year. Id. Ivanova worked for Integrated Genomics from 1999 until her resignation in May of 2004. Amended Complaint, at ¶¶ 34, 36. During that time she received a salary and benefits worth between $50,000 and $75,000 per year. Id. Both Kyrpides and Ivanova then went to work for the Joint Genome Institute in its Microbial Genome Analysis Program. Amended Complaint, at ¶¶ 24, 38. There, Kyrpides oversaw development of the Joint Genome Institute's IMG software product, which directly competes with Integrated Genomics' ERGOTM software. Amended Complaint, at ¶ 26. Ivanova "played a role" in the development of the IMG software. Amended Complaint, at ¶ 39. Integrated Genomics alleges on information and belief that before leaving their positions at Integrated Genomics, both Kyrpides and Ivanova solicited numerous colleagues to leave the company and to accept positions at the Joint Genome Institute. Amended Complaint, at ¶¶ 25, 37.

II. Subject Matter Jurisdiction

This is the second time that the court has been required to examine the adequacy of Integrated Genomics' jurisdictional allegations. On January 13, 2007, Ivanova moved to dismiss the original complaint for failure to state a claim upon which relief may be granted. Kyrpides filed a similar motion on April 12, 2007. On June 13, 2007, this court undertook a sua sponte inquiry to determine if subject matter jurisdiction in this case was proper and determined that Integrated Genomics had not properly alleged the citizenship of Kyrpides or Ivanova. Dkt. No. 29. The case was therefore dismissed without prejudice with leave to replead.

Integrated Genomics now alleges that Kyrpides is a Greek citizen, currently residing in California, and that Ivanova is a Russian citizen, also currently residing in California. Amended Complaint, at ¶¶ 2-3. Integrated Genomics is a Delaware corporation that has its principal place of business in Chicago, Illinois. Amended Complaint, at ¶ 1.

In the defendants' current motions to dismiss, they argue first that Integrated Genomics' allegations are insufficient because it did not properly plead that neither Kyrpides nor Ivanova is a permanent resident alien (in which case citizenship is determined differently than it is for non-permanent resident aliens), and that it should be required to amend its complaint again. This is incorrect, because courts "indulge the assumption that an alien is domiciled outside the United States, and leave it to the challenger to allege otherwise if there is reason to believe that the foreigner is a permanent resident who would destroy diversity." Karazanos v. Madison Two Assocs., 147 F.3d 624, 628 (7th Cir. 1998). Failure to allege that Kyrpides and Ivanova are not permanent resident aliens therefore does not render Integrated Genomics' jurisdictional allegations defective. Id. Furthermore, Kyrpides and Ivanova admit in their motions that they are not permanent residents. Therefore, this is not a basis for dismissal.

Kyrpides and Ivanova also challenge Integrated Genomics' allegation that the amount in controversy in this case exceeds $75,000. In its order of July 26, 2007, the court ordered Integrated Genomics to supplement its pleadings with an affidavit that supports its allegation that the amount in controversy exceeds $75,000. Dkt. No. 35.

Integrated Genomics filed the declaration of John W. Elling, "a CEO of Integrated Genomics," along with its response to the defendants' motions to dismiss. Declaration, Exhibit 1 to Integrated Genomics' Response, Dkt. No. 36, at ¶ 1. Elling declares that "as a result of defendants' actions, IG [Integrated Genomics] has lost a substantial number of customers. For example, at least 7 former customers of IG have switched to the JGI (the defendants' employer).. [r]esulting in a loss to IG of approximately $150,000." Declaration, at ¶ 3. Elling also discusses the company's lost academic customers:

Next, from a review of the 2006 JGI Progress Report, which is available online, the JGI has listed their academic gene sequencing program customers. At least, 8 researchers on 18 projects with whom IG used to work are now working with the JGI. They would not have been able to do this if the defendants did not ...


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