PTC Therapeutics, Inc. v. AcureX Biosciences Corporation, et al.

Background

PTC Therapeutics, Inc. alleged that AcureX Biosciences Corporation, Dr. William Shrader, and Dr. Sean Pintchovski misappropriated trade secrets concerning treatments for neurodegenerative diseases. The court had previously granted defendants’ first motion to dismiss and allowed PTC to amend. In its amended complaint, PTC dropped its California Uniform Trade Secrets Act claim and continued asserting claims under the federal Defend Trade Secrets Act, breach of contract, breach of the implied covenant of good faith and fair dealing, California’s Unfair Competition Law, and for a declaration concerning ownership of a patent application.

Defend Trade Secrets Act Claim

The court held that PTC plausibly identified two alleged trade secrets: the Proprietary Structural Motif and the proprietary assay cascade. PTC described the chemical structure and characteristics of the Proprietary Structural Motif and identified 20 assays comprising the assay cascade. The court concluded that these allegations sufficiently described the alleged secrets at the pleading stage. It rejected defendants’ arguments that the alleged information had been publicly disclosed or lacked economic value, explaining that those disputes could not be resolved on a motion to dismiss.

The court held that PTC did not plausibly identify two other alleged secrets: general “know-how” about ferroptosis and tiered assays, and the number of compounds PTC had tested. The court found that the know-how allegations relied on broad categories and “catchall” phrases, while PTC did not adequately explain the economic benefit of knowing the number of compounds tested.

As to misappropriation, the court held that PTC narrowly plausibly alleged that defendants used or disclosed the Proprietary Structural Motif. The allegations included the doctors’ prior work involving the alleged secret, their later work at AcureX, their listing as inventors on an AcureX patent application, and the alleged appearance of the motif in that application. The court held that PTC did not plausibly allege use of the assay cascade because it did not explain how the patent applications or the speed of AcureX’s development showed that defendants used the cascade. The court also rejected PTC’s alternative theory that defendants acquired the secrets through improper means because the amended complaint did not provide concrete facts showing a breach of, or inducement to breach, a confidentiality duty.

The court therefore stated that defendants’ motion to dismiss the Defend Trade Secrets Act claim was GRANTED IN PART and DENIED IN PART. Claims based on the assay cascade, “know-how,” and the number of compounds tested were dismissed. The claim based on the Proprietary Structural Motif was allowed to proceed. The court also declined to resolve defendants’ statute-of-limitations argument at the motion-to-dismiss stage because it involved factual disputes about when PTC discovered, or should have discovered, the alleged misappropriation.

Contract Claims

The court held that PTC plausibly alleged a breach-of-contract claim based on the alleged use of the Proprietary Structural Motif in developing AcureX’s compounds. It therefore DENIED the motion to dismiss that claim.

The court held that PTC had not plausibly alleged a breach of the implied covenant of good faith and fair dealing. PTC offered no new facts supporting its earlier theory about the inventorship of another patent application, and its allegations about statements by Dr. Shrader and his counsel did not explain how those statements unfairly interfered with PTC’s contractual rights or were made in bad faith. The court therefore GRANTED the motion to dismiss that claim and dismissed it without leave to amend.

Unfair-Competition Claim

The court held that PTC’s Unfair Competition Law claim was based on the same alleged conduct as its trade-secret claim. Under the court’s interpretation of California law, the California Uniform Trade Secrets Act preempts civil claims based on that conduct, including the Unfair Competition Law claim. The court therefore GRANTED the motion to dismiss the Unfair Competition Law claim and dismissed it without leave to amend because further amendment would be futile.

Declaratory Relief

PTC sought a declaration that it owned all rights in a specified international patent application, or alternatively an order requiring reassignment of rights or declaring PTC a co-owner. The court held that declaratory relief was available because PTC had plausibly alleged other claims. It rejected defendants’ argument that California Business and Professions Code section 16600 required dismissal, explaining that the requested relief concerned a court declaration about patent ownership rather than a contract restricting an employee after departure. The court therefore DENIED the motion to dismiss PTC’s request for declaratory relief.

Disposition and Amendment

Judge Araceli Martinez-Olguin ordered that defendants’ motion to dismiss the Defend Trade Secrets Act claim was GRANTED IN PART and DENIED IN PART. The motion was DENIED as to the Proprietary Structural Motif claim, DENIED as to the breach-of-contract claim, GRANTED as to the implied-covenant claim, GRANTED as to the Unfair Competition Law claim, and DENIED as to the request for declaratory relief.

The court granted PTC leave to amend its Defend Trade Secrets Act claims based on “know-how” and the number of compounds tested, and to amend its allegations of misappropriation concerning the assay cascade. Any amendment had to be filed within 21 days and could add only allegations concerning those specified claims, absent a stipulation or further court permission.