Labor & Employment Law Daily Wrap Up, TORT CLAIMS—S.D. Cal.: Pharmaceutical company can pursue trade secret misappropriation claims against former senior scientist and his new employer, (Feb 10, 2025)

By Kevin M. Finson, J.D.

An arbitration clause in the former scientist’s employment agreement with a subsidiary company was not enforceable against the plaintiff parent company.

Chicago-based pharmaceutical company AbbVie can pursue trade secret misappropriation and related claims against former senior scientist and his new employer, the federal district court in San Diego has held. AbbVie’s trade secrets had allegedly appeared in patent applications shortly after the former scientist began working for a California start-up competing pharmaceutical company. In addition, AbbVie was not bound by an arbitration agreement entered into between its subsidiary and the former scientist. While the former scientist had, at different times, worked for both AbbVie and its subsidiary, only the subsidiary had an arbitration agreement with him (AbbVie, Inc. v. Adcentrx Therapeutics Inc., No. 3:23-cv-02290-TWR-DEB (S.D. Cal. Feb. 6, 2025)).

AbbVie, Inc. (AbbVie) is a global biopharmaceutical company working on, among other things, a program for developing microtubule inhibitor antibody drug conjugates (MTi ADCs) as anti-cancer payloads/linker drugs. AbbVie employed Dr. Dong Jun Lee, who worked on a team of chemists who designed and synthesized payloads for the MTi ADC program, and Dr. Lee signed an employment agreement which contained assignment of inventions and confidentiality provisions. Subsequently, Dr. Lee transferred to work for Pharmacyclics, LLC, (Pharmacyclics), a wholly owned subsidiary of AbbVie. As part of his new employment with the subsidiary, Dr. Lee signed an arbitration agreement. Dr. Lee subsequently accepted employment with a start-up competitor, Adcentrx, Inc., (Adcentrx) and allegedly disclosed to Adcentrx trade secret and confidential information belonging to AbbVie. According to the complaint, approximately four months after Dr. Lee joined Adcentrx, the company began filing a series of patent applications naming Dr Lee as an inventor, which allegedly disclosed AbbVie’s trade secrets and confidential information.

Abbvie brought suit against Dr. Lee and Adcentrx for (1) misappropriation of trade secrets under the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1836, against both Adcentrx and Dr. Lee; (2) declaratory judgment against Adcentrx and Dr. Lee; (3) breach of the Inventions Assignment Provisions of the Employment Agreement against Dr. Lee; and (4) breach of the Confidentiality Provisions of the Employment Agreement against Dr. Lee. Before the court was Dr. Lee’s motion to compel arbitration based on his employment agreement with Pharmacyclics, and both defendants’ motion to dismiss, or, alternatively to stay pending arbitration.

Arbitration. AbbVie argued that the arbitration agreement could not be enforced against it because it was a non-signatory. Dr. Lee argued that the language of the agreement bound both parties, that Pharmacyclics had acted as AbbVie’s ostensible agent, or that AbbVie was a third-party beneficiary of the agreement.

The court, however, found that the agreement’s language explicitly defined the arbitration clause as applying only to Pharmacyclics and Dr. Lee, that there was no allegation AbbVie had taken any act which would lead Dr. Lee to believe Pharmacyclics had authority to bind AbbVie in its employment agreement with him, and that there was no indication the employment agreement between Pharmacyclics and Dr. Lee was made expressly for AbbVie’s benefit. The court denied the motion to compel arbitration, and likewise denied the motions to stay the case pending arbitration.

Failure to state a claim. The court found that AbbVie had properly alleged a trade secrets claim. AbbVie identified its proprietary MTi ADC payload designs and other technological information and asserted it had maintained secrecy of the information through computer controls, limitations on access, and similar measures. AbbVie also plausibly alleged misappropriation by Adcentrx because its formulae were exactly replicated in patent applications filed by Adcentrx, which had named Dr. Lee as the inventor. The patent applications were filed in “an impossibly fast timeframe for independent invention of the subject matter,” according to AbbVie. The remaining causes of action, which were declaratory judgment and breach of contract, all followed from the trade secrets claim.

The court denied the motions to compel arbitration, to stay the case pending arbitration, and to dismiss for failure to state a claim.

The Case is No. 3:23-cv-02290-TWR-DEB.

Judge: Robinson, T.

Attorneys: Andrea Jill Weiss Jeffries (Jones Day) for AbbVie Inc. David Morad Elihu (Quinn Emanuel Uraquhart & Sullivan, LLP) for Adcentrx Therapeutics Inc.

Companies: AbbVie Inc.; Adcentrx Therapeutics Inc.

Cases: TortClaims Arbitration Procedure CaliforniaNews