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Families of Spinal Muscular Atrophy v. Nationwide Children's Hospital

United States District Court, N.D. Illinois, Eastern Division

February 13, 2017



          AMY J. ST. EVE, District Court Judge:

         Defendants Nationwide Children's Hospital and The Research Institute at Nationwide Children's Hospital (collectively, “Defendants”) have moved to dismiss Plaintiff Families of Spinal Muscular Atrophy's (“Plaintiff”) complaint under Federal Rule of Civil Procedure 12(b)(6). (R. 71.) Additionally, Defendants have moved “to strike from the Amended Complaint pursuant to Rule 12(f) any request for relief by Plaintiff in the form of stock of AveXis, Inc.” (Id.) For the following reasons, the Court (1) grants in part and denies in part Defendants' motion to dismiss, and (2) denies Defendants' motion to strike to the extent it relates to Plaintiff's remaining claim.


         I. Factual Allegations

         Plaintiff is a nonprofit corporation that funds research related to Spinal Muscular Atrophy (“SMA”), a genetic disease, and Defendants conduct research on various topics, including SMA treatments. (R. 53, Am. Compl., at 1-6, Exs. A-B.) One way Plaintiff raises money to fund additional research “is by including commercialization clauses and provisions in its funding agreements under which it receives royalties and other considerations in the event the funded research and non-financial resource investments made by [Plaintiff] to a research institution lead to commercial licensing of technology associated with the funding agreements.” (Id. at ¶ 29- 31.) This case concerns whether two separate research-funding agreements between the parties entitle Plaintiff to proceeds from a licensing agreement between Defendants and a third party.

         A. The Grant Agreement

         In September 2009, Defendants applied for a grant for a project entitled “Optimizing Titer and Window of Opportunity for targeting Motor Neurons via an AAV9 vector in Newborn Non-human primates.”[2] (Id., Ex. A at 6.) Plaintiff agreed to fund the project, and, in April 2010, the parties entered into a Grant Agreement (the “GA”). (Id. at ¶¶ 58-59, Ex. A at 1.) The GA gave Defendants a $100, 000 budget, and Defendants agreed to pay Plaintiff “five percent (5%) of all royalty or other cash income received by the [Defendants] from licenses or sublicenses to all of the Inventions developed from activities under this Agreement.” (Id. at ¶¶ 61, 66, Ex. A at 1, 3.) The GA defines the term “Inventions” as “any invention (or other intellectual property), whether patentable or unpatentable conceived or first actually reduced to practice as part of the activities under this Agreement.” (Id. at ¶ 67, Ex. A at 2.)

         Plaintiff alleges that, before Defendants' grant application, Defendants' “prior research had shown that systemic treatment with scAAV9 was only successful if administered to newborn SMA mice on day 1 after birth.” (Id. at ¶ 41 (emphasis in original).) If, however, “scAAV9 was delivered 5 days after birth, the therapy was only modestly beneficial, and if administered to mice 10 days after birth, the treatment was unsuccessful.” (Id.) Thus, according to Plaintiff, Defendants' prior research “provided only a very limited opportunity for practical human clinical trials and treatment and commercialization of systemic SMA treatment with scAAV9.” (Id. at ¶ 42.) This is the case because, if the results in humans were similar to the results in mice, “treatment of SMA in newborn humans is of limited feasibility and practicality, as SMA in humans is currently diagnosed when a patient is symptomatic and older.” (Id. at ¶¶ 43-44.)

         Plaintiff alleges that Defendants applied for a grant from Plaintiff because they “needed funding . . . to gather critical data and evidence to move to clinical trials and to establish the commercial viability of systemic administration of scAAV9 in humans.” (Id. at ¶ 47.) In its grant application, Defendants noted that scAAV9 “is able to cross the blood-brain-barrier (BBB) to deliver transgenes via the systemic circulation to the central nervous system (CNS).” (Id., Ex. E at 4.) Defendants explained that they “have noticed a stark age-dependent contrast in the CNS regions and cell-types transduced”-specifically, in newborn mice, more than half “of motor neurons in the spinal cord appear to be transduced, while in adult animals (60-70 days old), scAAV9-transgenic expression seems strongly limited to non-neuronal (gilal) cells” likely “due to the post-natal development of the BBB.” (Id. at ¶ 47, Ex. E at 4; see also id., Ex. D-3 at 1972 (explaining that studies in mice showed a “progressive decline in motor neuron transduction” during the first ten days of life).) Defendants reported that their previous studies resulted in “near-complete rescue” after “scAAV9-mediated SMN delivery in newborn mice.” (Id., Ex. E at 4.) They said, however, that “[w]hile this is very exciting, we must now translate this method of gene delivery to larger species in order to move to clinical trials.” (Id.) In furtherance of this ultimate goal, the grant application listed two aims: (1) to “[d]etermine dose of scAAV9 sufficient for neuronal, specifically motor neuron transduction in non-human primates, ” and (2) to “[a]ssess time-dependent transduction patterning in primates throughout development from 1- 180 days after birth.” (Id.)

         According to Plaintiff, the GA research “demonstrated that systemic administration of scAAV9 was successful in non-human primates (i.e., Cynomolgus macaques) at all time points investigated, including in non-newborn primates.” (Id. at ¶ 73.) Plaintiff alleges that “these results provided confidence for translation to SMA patients by overcoming the potential clinical obstacle for advancing AAV9 gene therapy for SMA by showing that the very limited window of opportunity as suggested by the mice data was not present in non-human primates.” (Id.) In short, the GA research showed that the window of opportunity for effective administration of scAAV9 was larger in non-human primates than in mice. (Id. at ¶¶ 74-78.) Plaintiff contends that “[t]he new information [from the GA project] constitutes an Invention under the grant agreement, ” because “[t]he technological discovery that systemic administration of scAAV9 is successful in non-newborn non-human primates was first reduced to practice as part of the activities under the [GA].” (Id. at ¶¶ 80-81 (emphasis in original).)

         B. The Research Collaboration Agreement

         Later, in May 2012, the parties entered into a second agreement, the Research Collaboration Agreement (the “RCA”), to conduct a research project entitled “IND Enabling Studies for a CNS Delivered Gene Therapy for Spinal Muscular Atrophy.” (Id. at ¶¶ 84-110, Ex. B at 1.) Under the RCA, Defendants had a maximum budget of $300, 000, (id. at ¶ 96, Ex. B at 1, 10), and Defendants agreed to “pay [Plaintiff] five percent (5%) of all royalty[ and] other consideration up to a cap of $300, 000, received by the [Defendants] from licenses or sublicenses to any of the Inventions solely or jointly owned by [Defendants], ” (id., Ex. B at 3.) The RCA defined the term “Inventions” as “any potentially patentable invention conceived in the performance of the Research Project.” (Id.) The RCA further provided that “the existing inventions and technologies of [Defendants] . . . are their separate property and are not affected by this Agreement, and [Plaintiff] shall not have any claims to or rights in such existing inventions and technologies.” (Id.) In March 2015, the parties amended the RCA, raising both the maximum budget of the project as well as the cap on “royalty and other consideration” payments Defendants would make to Plaintiff if Defendants licensed any “Inventions.” (Id. at ¶¶ 112, 117, Ex. B-1 at 1.)

         The RCA identified specific “aims” of the research project. One such aim was to “[d]etermine the lowest dosage which yields high motor neuron transduction in nonhuman primates.” (Id., Ex. B at 9.; see also id., Ex. B at 8 (noting the aim of “[o]ptimiz[ing] intrathecal dosing in nonhuman primates for most efficient targeting of spinal motor neurons using AAV9”).) The criteria for success of this goal was “[t]o complete intrathecal injections in non- human primates to achieve 70% motor neuron transduction in the spinal cord.” (Id., Ex. B at 9.) The purpose of reaching this aim was to take a step toward human clinical trials. (Id. (“The lowest dose which yields high motor neuron transduction will determine which doses should be used in the planned first-in-human clinical trial.”))

         Plaintiff alleges that Defendants encountered obstacles in reaching the goal described in the preceding paragraph. (Id. at ¶ 123.) Specifically, they had difficulty “getting high enough motor neuron transduction across spinal cord segments, ” as there was less than 70% transduction in some regions in the spinal cord. (Id. at ¶¶ 122-24) The minutes of a Joint Steering Committee call in May 2013 indicate, that in one test-subject monkey, “58% of cervical MNs were hit, 67% of thoracic MNs, and 78% of MNs in the lumbar spinal cord.” (Id. at ¶ 128, Ex. O-3 at 2.) The minutes indicate that the lower transduction numbers were “likely due to flow impedance, ” which “can be improved by optimizing the delivery method.” (Id., Ex. O-3 at 2.) Plaintiff alleges that during the May 2013 call, the committee discussed that the “use of tilting techniques in connection with the intrathecal administration of scAAV9, such as the Trendelenburg position, could be useful.” (Id. at ¶ 129.) Additionally, according to Plaintiff, the committee discussed in November 2013 “that the tilting techniques were providing improvements in motor neuron transductions across spinal segments, using the tilting table delivery method.” (Id.)

         Plaintiff alleges that in August 2014, the committee minute notes indicate that “[i]t was discovered that tilting greatly improves motor neuron transduction.” (Id. at ¶ 130.) The committee reported that “[t]he best results are seen with 10 minutes of tilting, showing over 50% of cervical MNs were hit, 60% of thoracic MNs, and almost 80% of MNs in the lumbar spinal cord.” (Id. at O-5 at 2.) Plaintiff claims that “[t]he data from the use of the Trendelenburg position (tilting table) solved the transduction efficient issues across spinal cord segments.” (Id. at ¶ 130.) Indeed, Plaintiff alleges that “[b]ased on the tilting experiments reported in August 2014, [the principal investigator for Defendants, ] Dr. Kaspar[, ] concluded that the monkey studies conducted under the RCA led to a dose that yields higher motor neuron transduction thereby providing an informed dose that should be planned for first-in-human clinical trials in infants.” (Id. at ¶¶ 60, 131.)

         The complaint says that Defendants “filed several patent applications covering research performed under the RCA.” (Id. at ¶ 132.) One such application-filed July 31, 2013-is International Patent Application No. PCT/US2013/53065 (the “'065 application”), which is entitled “Intrathecal delivery of recombinant adeno-associated virus 9.” (Id. at ¶¶ 132, 135.) According to Plaintiff, the '065 application “describes the use of a new patient position used during treatment-the Trendelenburg position (tilting position)-and states that using this previously unexplored technique ‘results in a two-fold (100%) improvement.” (Id. at ¶ 137 (quoting id. Ex. H at 21).) Additionally, Claim 23 in the patent application “is directed to using the Trendelenburg position in connection with scAAV9.” (Id. at ¶ 138.)

         Plaintiff also refers in the amended complaint to a 2014 article by Dr. Kaspar, which states that “[n]otably, [Defendants were] able to further improve the transduction rate in the brain and brainstem when the nonhuman primates were kept in the Trendelenburg position for 5-10 minutes postinjection.” (Id. at ¶ 140, Ex. I at 478; see also id., Ex. I at 484 (“Strikingly, the transduction rate with the same dose was drastically improved when subjects were kept in the Trendelenburg position for 10 minutes after vector infusion . . . .”).) That article further notes that “[t]ilting tables are regularly used to spread intrathecal delivered anesthetics and drugs in adults and this study is the first one to demonstrate a similar effect on viral vector distribution.”

Id., Ex. I at 484.)

         Based on the above, Plaintiff alleges that the technological discovery of using the Trendelenburg position with administration of scAAV9 was first conceived during the performance of the RCA research and therefore constitutes an “Invention” under the RCA. (Id. at 143-51.)

         C. The AveXis Licensing Agreement

         In September 2013, Defendants entered into a license agreement with BioLife Cell Bank, Inc., which is now known as AveXis, Inc. (Id. at ¶¶ 159-60, Ex. C; R. 52 at 3.) The agreement gives AveXis an exclusive license to SMN AAV9 delivery technology as represented by various patent applications (including the '065 application) and associated “Technical Information, ” which includes “research and development information, unpatented inventions, and know-how pertaining to the Licensed Patents.” (R. 53 at ¶¶ 162-69, Ex. C at 1-3, 21, 22.) Plaintiff alleges that the inventions it identifies under the GA and RCA “fall within the scope of ‘Licensed Technology, ' under the AveXis License Agreement.” (Id. at 170.) In exchange for the technology license, the agreement provides that Defendants would receive over 200, 000 shares of AveXis stock. (Id. at ¶ 181, Ex. C at 8.) Additionally, the license agreement provides that Defendants will receive payments, subject to certain conditions, at regulatory milestones- specifically, $75, 000 for “Approval by the FDA of a Biologics License Application for the scAA V9-SMN gene therapy product for spinal muscular atrophy type 1 for vascular delivery” and $50, 000 for “Approval by the FDA of a ...

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