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Integrated Genomics, Inc. v. Gerngross

July 7, 2009

INTEGRATED GENOMICS, INC., PLAINTIFF,
v.
TILLMAN GERNGROSS, DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Integrated Genomics, Inc., has sued Tillman Gerngross, asserting two claims of breach of contract and one claim of fraudulent misrepresentation. Gerngross has moved for summary judgment on all counts, and Integrated Genomics has moved for summary judgment on the contract claims.

Background

Because the parties have filed cross-motions for summary judgment, the Court "construe[s] the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Crews v. City of Mt. Vernon, 567 F.3d 860, 864 (7th Cir. 2009).

Integrated Genomics provides gene sequencing data and services to academic researchers and commercial clients. In 2002 to 2003, the fees it charged for sequencing data varied by customer type. It was common in the industry at the time to charge academic researchers a relatively low license fee but to charge commercial clients a much higher fee. The cost of a commercial license depended upon factors such as the terms of the license and the quality of the data to be delivered.

By 2002, Integrated Genomics had developed genomic sequencing for Pichia pastoris, a common yeast. At that time, it was the only source from which the data could be licensed. Integrated Genomics negotiated, but never closed, potential licensing deals for Pichia data with two commercial clients. For these deals, Integrated Genomics quoted license fees ranging from the high six-figure to low seven-figure range.

Tillman Gerngross was a professor at Dartmouth College. He also co-founded GlycoFi in 2000 and served as its Chief Scientific Officer until August 2007, when the company was sold to Merck & Co. Gerngross devised a system by which yeasts, like Pichia pastoris, could be genetically modified to express proteins in a way similar to human cells.

GlycoFi was "incubated" within Gerngross's department at Dartmouth before the company acquired its own facilities in December 2002. With the college's permission, Gerngross used Dartmouth facilities to do GlycoFi business. Dartmouth also purchased items for, and was later reimbursed by, GlycoFi.

Shortly before April 2002, Gerngross contacted Integrated Genomics seeking to license Pichia pastoris genomic sequencing data. Gerngross testified during his deposition that he spoke with Yakov Kogan of Integrated Genomics at that time. According to Gerngross, they discussed the quality of the data, which was a "rough draft" and "reflected merely 3x coverage," and agreed on a price of $5,000. Def. Mot. at 2. Kogan does not recall speaking to Gerngross at that time. In fact, Kogan testified in his deposition that he was not involved in negotiations to sell the information to Gerngross. He also testified that he would not have had much contact with potential customers in April 2002 due to the nature of his position with Integrated Genomics at the time.

In April 2002, Gerngross spoke with Yuri Nikolsky, then Vice-President of Business Development at Integrated Genomics. According to Gerngross, Nikolsky sent him a form contract containing several terms that would have encumbered any commercial application of the technology he was developing. Gerngross does not recall the specifics of what he told Nikolsky, but he testified that he mentioned that he was involved in a commercial effort. Gerngross also testified that Nikolsky expressed a desire to proceed with the transaction but that Integrated Genomics was concerned about the information entering the public domain. In response to those concerns, he sent a letter to Nikolsky detailing certain agreed-upon restrictions. This letter stated:

This is to state the restrictions that apply to the data that we are obtaining from Integrated Genomics. My research group at Dartmouth College is restricted to the publication of no more than 10kb [ten kilobases] of sequencing data from the Pichia genome per calendar year. This restriction is void if the genome data becomes available from a public domain at not [sic] charge.

Def. Mot., Ex. A1 at IGI 00005. On Gerngross's instructions, Nikolsky faxed the invoice to Gerngross's Dartmouth College address and received a check for $5,000 from Dartmouth College the following day. Integrated Genomics then sent Gerngross a CD containing the Pichia data.

Nikolsky could not remember whether Gerngross informed him that he was involved in a commercial effort or whether he planned to use the Pichia data for commercial purposes, but he testified during his deposition that he considered Gerngross to be an academic customer. Both Nikolsky and Kogan testified that they did not believe that Gerngross had lied to them.

Between December 2002 and May 2003, Gerngross and Kogan, who had replaced Nikolsky by that time, discussed another deal for the sequencing of a different organism. In December 2002, Kogan sent Gerngross an e-mail in which he stated, "Sometimes [sic] I would like to talk to you as the CSO of the [sic] GlycoFi." Def. Mot. Ex. A6 at TG-88. Kogan testified that he learned of Gerngross's affiliation with GlycoFi sometime before he sent this e-mail. In May ...


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