The Record

Draft Statement of Defence: Yolbolsum Canada Inc., Prodrome Sciences Inc., Prodrome Health Centers Inc., Dayan Goodenowe, et al., in response to Med-Life Discoveries LP

Date
Source
Draft prepared in response to Med-Life Discoveries LP's Statement of Claim, Court of Queen's Bench for Saskatchewan, Court File Q.B. No. 839 of 2019. This is a draft, not the version filed with the court.
Author
WMCZ Lawyers, solicitors for the defendants (Michael J. Krawchuk)
Type
Filing

This document is a draft Statement of Defence prepared for the defendants in response to the Statement of Claim filed by Med-Life Discoveries LP on June 7, 2019. Dr. Goodenowe has stated that the version ultimately filed with the court contains less detail than this draft, and that he does not retain a copy of the filed version. The draft references events through April 10, 2019. The document sets out the defendants' position on the chain of intellectual property ownership between YBCI, PDI, and Med-Life, the terms of the Non-Competition and Intellectual Property Agreement, the timing of Prodrome's research equipment acquisitions and methods development, and the defendants' response to each of the plaintiff's allegations. As a draft pleading, it represents the defendants' position as set out by their counsel at the time of drafting.

Original document

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Transcription

This is a partial transcription of selected paragraphs from the Draft Statement of Defence, covering the introductory denial, the factual background on the invention and licensing chain, the core legal argument on trade secret versus patent protection, the timing of Prodrome’s equipment and methods, and the concluding denial. Numbered paragraphs below correspond to the original draft. The full twenty-page draft is available as the original PDF linked above.

COURT FILE NUMBER: Q.B. No. 839 of 2019 COURT OF QUEEN’S BENCH FOR SASKATCHEWAN JUDICIAL CENTRE: SASKATOON

PLAINTIFF: MED-LIFE DISCOVERIES LP, by its general partner MED-LIFE DISCOVERIES GP INC.

DEFENDANTS: YOLBOLSUM CANADA INC., PRODROME SCIENCES INC., PRODROME HEALTH CENTERS INC., DAYAN GOODENOWE (also known as DAYAN GOODNOUGH), MONTE GORCHINSKI, ERIKA SHKLANKA, VIJITHA SENANAYAKE (also known as GAMARALLAGE SENANAYAKE), YANQIU JIANG, AUDREY TRICE (also known as AUDREY REIDT), ELLEN LIANG (also known as JIAQI LIANG), IAN WRIGHT, JOHN RYAN, KEVIN PERROTT, JANA HORSNALL, and TANYA SCHELL

STATEMENT OF DEFENCE

  1. Except as admitted herein, the Defendants deny each and every allegation of the Plaintiffs in the Statement of Claim.

  2. The Defendants admit paragraphs 1-11, 15, 16 of the Statement of Claim.

The Invention and Licensing Chain

  1. Dr. Goodenowe invented a novel method of complex sample analysis in 1999 (the “Invention”).

  2. The Invention and associated enabling technology (the “YBCI Technology”) are publicly described in detail in various patent applications and issued patents and its use applications are owned by YBCI and protected by patents (the “YBCI Patents”).

  3. YBCI licensed the Invention and Patents to PDI on December 15, 2001 enabling PDI to practice the Invention and develop and commercialize the technology (the “YBCI-PDI License”).

  4. In the course of further developing and commercializing the YBCI Technology, PDI hired personnel and entered into employment agreements with them (the “PDI Employment Agreements”).

  5. YBCI entered into a Management Services Agreement with PDI on February 1, 2002 (the “YBCI-MSA”). In accordance with the YBCI-MSA, Dr. Goodenowe provided services to PDI as President and CEO.

  6. Dr. Goodenowe entered into a Non-Competition and Intellectual Property Agreement with PDI on April 22, 2003 which was further amended on April 18, 2011 (the “Goodenowe NCIP”).

Receivership

  1. On December 3, 2015 the Court of Queen’s Bench (the “Court”) appointed FTI Consulting as the interim receiver and manager of all the assets, undertakings and properties of PDI and PLSI.

  2. On February 25, 2016, the Court appointed FTI Consulting as the receiver and manager of all the assets, undertakings and properties of PDI and authorized the Receiver to market the property of PDI and PLSI (the “PDI Property”) for sale.

Paragraphs 11 through 33 identify Med-Life, its ownership structure (GOFI 50 Class A Shares, Concorde Centres Inc. 25 Class A Shares, PIC Flight Services Inc. 25 Class A Shares), and individuals serving dual roles between PDI, GOFI, Concorde, PIC, and Med-Life Discoveries GP Inc. (Douglas Banzet, L. David Dube, Craig Bell). They also describe the receivership process and the Med-Life Purchase and Sale Agreement of August 22, 2016, noting that the Receivership was initiated by GOFI, that FTI Consulting was selected by GOFI to be the Receiver, that the Receivership was financed by GOFI, Concorde, and PIC, and that Med-Life did not request the transfer and assignment of the YBCI-PDI License, the YBCI-MSA, or the PDI Employment Agreements from PDI to Med-Life as part of the Purchase and Sale Agreement.

The Non-Competition Covenant and Prodrome’s Independence

  1. Med-Life did request, and was granted, the transfer and assignment of the Goodenowe-NCIP.

  2. The Goodenowe-NCIP agreement narrowly describes the type of business activities that Dr. Goodenowe and PDI agreed that Goodenowe would not engage in for a period of 12 months after the termination of the agreement, “however caused” as “a business that offers the service using the processes described in PCT Patent Application No. PCI/CA01/00111 filed February 1, 2001, as amended and described as ‘Method of Non-Targeted Complex Sample Analysis’”. On July 5, 2016, Dr. Goodenowe resigned from PDI. Prodrome Sciences did not purchase a mass spectrometer capable of executing the processes described in PCT Patent Application No. PCI/CA01/00111 until October 2017 and did not begin offering Non-Targeted Complex Sample Analysis services until 2018, which is after the agreed upon 12-month non-compete clause in the Goodenowe-NCIP. Accordingly, Dr. Goodenowe’s actions as President and CEO of Prodrome Sciences are in compliance with the Goodenowe-NCIP.

  3. The Goodenowe-NCIP agreement also describes the type of Intellectual property that Dr. Goodenowe and PDI agreed that PDI would acquire from Dr. Goodenowe as “all intellectual property right to all writings, products, developments or services, inventions and improvements (whether or not patentable) (the ‘Works’) which Goodenowe makes, discovers or develops while Yol Bolsum Canada Inc. is under contract to the Corporation, whether during working hours or at any other time, which directly and specifically arise from any metabolic profiling data generated or produced by the Corporation”.

Paragraphs 37 through 43 note that the Goodenowe-NCIP is the only agreement describing Dr. Goodenowe’s intellectual property and non-competition obligations to PDI, describe the intellectual property portfolio of twenty patent families created for PDI, and set out Med-Life’s allegations that Dr. Goodenowe breached his intellectual property obligations by founding Prodrome and offering diagnostic tests and plasmalogen precursor therapeutics.

  1. Proprietary information is correctly defined by Med-Life as information that a company wishes to keep secret. As per the Goodenowe-NCIP, PDI acquired the intellectual property rights of Dr. Goodenowe’s “Works” during the time that the YBCI-MSA was in effect. The decision as to the management, protection, and exploitation of the intellectual property contained within Dr. Goodenowe’s Works was entirely the responsibility of PDI. The protection and exploitation of scientific intellectual property, such as Dr. Goodenowe’s Works falls into two categories, Trade Secrets or Patents. Trade Secret protection and Patent protection of intellectual property are mutually exclusive. Typically, intellectual property that is deemed to be insufficiently novel to meet the threshold of patentability is protected as a trade secret and intellectual property that is deemed sufficiently novel to meet the threshold of patentability is protected by filing a patent application. Trade secret protection requires that the intellectual property remain proprietary. Any intellectual property that is publicly disclosed by a company is no longer proprietary and is no longer a trade secret. Patent protection of intellectual property is the exact opposite of trade secret protection of intellectual property. A company that wishes to protect intellectual property with a patent is obligated to publicly disclose the intellectual property in sufficient detail that the public can practice the invention when the patent exclusivity period expires. In exchange for publicly disclosing the intellectual property (i.e. making the intellectual property non-proprietary), the patent applicant seeks to obtain certain exclusive rights contained within the disclosed intellectual property. These specific intellectual property rights are defined in the patent claims. For clarity, the only intellectual property rights contained within a patent application are the issued claims, all other intellectual property disclosed by the patent applicant becomes public domain the moment the patent application is published.

  2. Under Dr. Goodenowe’s supervision, the YBCI technology was successfully used by PDI to identify putative diagnostic biomarkers of colorectal cancer, pancreatic cancer, ovarian cancer and dementia. As per the Goodenowe-NCIP, Dr. Goodenowe shared and disclosed all of his Works relating to the diagnosis of these diseases to PDI. PDI subsequently decided to seek formal intellectual property protection for specific novel inventions made by Dr. Goodenowe through the filing of various patent applications in which PDI publicly disclosed Dr. Goodenowe’s Works in exchange for specific rights of exclusivity as described in the various patent claims. For clarity, the intellectual property publicly disclosed by PDI in its patent applications is no longer proprietary PDI intellectual property.

Paragraphs 46 through 52 list the PDI patent applications and their publication dates, arguing that each publicly disclosed the methodologies and biomarkers now alleged to be proprietary. The patents referenced include PCT CA2006/001502 (colorectal and ovarian cancer diagnosis, published March 3, 2007), PCT CA2010/001565 (pancreatic cancer biomarkers, published April 7, 2011), PCT CA2007/000313 (dementia and neurological disorders, published September 7, 2007), PCT CA2007/001472 (alkyl-acylglycerols for Alzheimer’s type dementia, published June 20, 2008), PCT CA2009/001853 (plasmalogen compounds, published July 1, 2010), and PCT CA2012/001064 (plasmalogen synthesis, published May 23, 2013). These paragraphs also note that PDI published numerous research papers, posters, and abstracts describing the diagnostics and therapeutics now owned by Med-Life.

Independence of Prodrome’s Equipment and Methods

  1. None of the diagnostic tests described in the Med-Life Statement of Claim is performed by Prodrome Sciences Inc. and none is performed in Canada.

  2. None of the therapeutic molecules described in the Med-Life Statement of Claim is manufactured, sold, or distributed by Prodrome and none of these activities are performed in Canada.

  3. The scientific equipment purchased and used by Prodrome Sciences is of different makes and models than the scientific equipment owned by PDI. All operational procedures and methods are new and were developed by Dr. Goodenowe after November 1, 2017.

  4. The triple extraction procedure used by Prodrome to extract metabolites from biological specimens is new and was developed by Dr. Goodenowe after November 1, 2017.

  5. The plasmalogen precursors under development at Prodrome are new and were designed by Dr. Goodenowe after November 1, 2016. In addition, the synthetic procedures used by Prodrome to manufacture the Prodrome Plasmalogen Precursors are new and were developed by Dr. Goodenowe after November 1, 2017.

  6. Based on the foregoing, the Defendants, deny that any PDI Proprietary Information was used in the development of the Prodrome Diagnostics.

  7. Based on the foregoing, the Defendants, deny that any PDI Proprietary Information was used in the development of the Prodrome Therapeutics.

Paragraphs 60 through 64 describe what the defence characterizes as a documented history of false and defamatory statements by Med-Life about Dr. Goodenowe and Prodrome. The defence cites a November 30, 2016 email from Shawn Ritchie to Dr. Nancy Braverman, a July 5, 2018 email from Shawn Ritchie to Tomo Tominaga of NK Medico alleging patent infringement, a July 9, 2018 follow-up email threatening legal action if NK Medico did not terminate its relationship with Prodrome, and communications between Prodrome and Med-Life on multiple dates in 2017, 2018, and 2019.

Conclusion

  1. The allegations put forth by Med-Life in the June 7th Statement of Claim are false and were known to be false by Med-Life at the time of filing.

WHEREFORE the Defendants pray that the Plaintiffs’ claim be dismissed with costs.

DATED at the City of Saskatoon, in the Province of Saskatchewan, 2019.

WMCZ Lawyers Per: Michael J. Krawchuk, Solicitor for the Defendants.

Address: 410, 475 2nd Ave S, Saskatoon, SK S7K 1P4 File No: 10465-24027

NOTICE: If you intend to make a reply to this Statement of Defence, you must serve and file the reply within 8 days after service of the Statement of Defence.