Phyto Tech Corp. v. Givaudan SA
- John Koeltl
- 1:18-cv-06172-JGK
- U.S. District Court · Southern District of New York
- 34
In Phyto Tech Corp. v. Givaudan SA, Judge Koeltl dismissed the trade-secret claims and awarded plaintiffs $1 for Givaudan’s contract breach.
Phyto Tech Corp., doing business as Blue California, and Conagen received $1 in nominal damages for Givaudan’s breach of the BGN LLC Agreement. Their federal and Delaware trade-secret claims were dismissed with prejudice. Givaudan was found liable for the contract breach but was not required to pay compensatory damages.
What happened
Phyto Tech Corp. and Conagen sued Givaudan SA after Givaudan worked with another company on a biomanufacturing project and shared information related to Conagen’s capabilities. They claimed Givaudan misused trade secrets under federal and Delaware law and violated a confidentiality provision in the agreement governing their joint venture.
After a non-jury trial, the court found that the information Givaudan shared did not qualify as a trade secret because the plaintiffs did not show that it had economic value from being secret. The court also found no evidence that Givaudan or anyone else used the information or that the alleged disclosure caused damages.
Judge Koeltl ruled that Givaudan breached the joint-venture agreement’s confidentiality provision, but awarded only $1 in nominal damages. He dismissed the federal and Delaware trade-secret claims with prejudice and directed the Clerk to enter judgment and close the case.
The detailed version
- Phyto Tech Corp. v. Givaudan SA · No. 1:18-cv-06172-JGK
- John Koeltl
- July 22, 2022
Background
Phyto Tech Corp., doing business as Blue California, and Conagen, Inc. sued Givaudan SA. The plaintiffs asserted claims under the federal Defend Trade Secrets Act and the Delaware Uniform Trade Secrets Act, alleging that Givaudan misappropriated trade secrets. They also alleged that Givaudan breached a confidentiality provision in the agreement creating BGN Tech LLC, a joint venture between Blue California and Givaudan.
The dispute involved a biomanufacturing project for a compound that Givaudan wanted to produce through a biological process. The BGN agreement allowed Givaudan and Blue California to pursue business activities outside the joint venture, including activities that competed with BGN or one of its members. The agreement nevertheless required the parties to keep confidential trade secrets and other confidential information received from the other party or from BGN.
Givaudan worked with an undisclosed third-party partner on the early stages of the project. In 2017, Givaudan disclosed information about that project and the partner’s role to Conagen and later entered discussions about using Conagen for scale-up and manufacturing. In emails from January and February 2018, Givaudan shared some information about Conagen’s manufacturing capabilities with the third-party partner and said it would obtain additional information from Conagen.
Trade-secret claims
A trade secret is information that has economic value because it is not generally known or readily discoverable, and that its owner reasonably tried to keep secret. To prove misappropriation, a plaintiff must identify the alleged trade secret specifically and show that the defendant improperly acquired, disclosed, or used it. The plaintiff must also prove damages caused by the alleged misappropriation; damages cannot rest on speculation.
The court found that the only information the plaintiffs identified as coming from or belonging to Conagen was Conagen’s preference for certain conditions and a particular capability. The court credited Givaudan’s evidence that the preference was a standard industry consideration, that the capability was not unique, and that the plaintiffs had not shown either item had competitive value because of secrecy.
The court also found no evidence that Givaudan, the third-party partner, or anyone else used the information to anyone’s advantage or used it at all. The plaintiffs did not show that the alleged trade secrets gave Conagen unique industry standing, had been successfully licensed, enabled greater efficiency, departed from industry standards, or required significant development expense. The court therefore concluded that the information did not qualify as trade secrets and that the plaintiffs had not proved misappropriation under either federal or Delaware law.
Damages
The court separately found that the plaintiffs failed to prove damages caused by any alleged misappropriation. The damages calculations were speculative, and the evidence showed that the parties did not proceed with Conagen on the scale-up work because their broader relationship broke down. The court also found no evidence supporting a reasonable royalty or other damages measure.
Contract claim and disposition
The court found that Givaudan breached the BGN LLC Agreement’s confidentiality provision. Givaudan did not contest that its disclosure in the January and February 2018 email exchange constituted a breach. But the plaintiffs did not prove that the breach caused actual damages, so the court denied compensatory damages.
Under Delaware law, nominal damages may be awarded for a contract breach even when compensatory damages are not proven. The court awarded the plaintiffs $1 in nominal damages.
Judge John G. Koeltl dismissed the plaintiffs’ federal and Delaware trade-secret causes of action with prejudice. The court held Givaudan liable to the plaintiffs for $1 in nominal damages for breaching the BGN LLC Agreement, directed the Clerk to enter an appropriate judgment, and ordered the case closed. The opinion also states that any claim based on the separate 2017 Mutual Confidentiality Agreement was not properly before the court and was dismissed.
Read the full 34-page opinion on CourtListener, the free public archive maintained by the Free Law Project.