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Medsense, LLC v. University System of Maryland

United States District Court, D. Maryland, Southern Division

September 27, 2019

MEDSENSE, LLC, Plaintiff,


          The Honorable Gina L. Simms United States Magistrate Judge.

         MedSense, LLC (“MedSense” or “Plaintiff”) brings this action against Defendants University System of Maryland, University of Maryland, College Park, Miao Yu, and Hyung Dae Bae (collectively, the “Defendants”). (ECF No. 25). In essence, Plaintiff alleges that: (a) the University System of Maryland (“USM”) and University of Maryland, College Park (“UMD”) breached an exclusive licensing agreement related to certain intellectual property (“IP”) by failing to disclose authored publications to MedSense; and (b) Defendants Yu and Bae, the authors of those publications, disclosed trade secrets and confidential information. (Id.).

         Pending before this Court is Defendants’ “Motion to Dismiss Plaintiff’s First Amended Complaint or, in the Alternative, for Summary Judgment, ” which Plaintiff opposes. The issues have been fully briefed. ECF Nos. 29, 30 and 32, and this Court finds that no hearing is necessary. See Local Rule (L.R.) 105.6. For the reasons set forth more fully below, Defendant’s motion is GRANTED.


         MedSense is a limited liability corporation organized under the laws of the State of Delaware, with a principal place of business in Irvine, California. (ECF No. 25, ¶ 3). The company engages in the design and manufacture of miniature fiber optic pressure and temperature sensors and sensor-based systems, as well as those related to medical or industrial application. (Id.). USM is body corporate and politic composed of constituent organizations. (Id., ¶ 4). UMD is a higher learning institution and constituent organization of USM. (Id., ¶ 5). Miao Yu, Ph.D., is a Maryland resident and UMD professor of mechanical engineering and research scientist. (Id., ¶ 6). Hyung Dae Bae, Ph.D., is a Maryland resident and former UMD professor of mechanical engineering and research scientist. (Id., ¶ 7). Dr. Bae currently is a professor at Howard University. (Id.).

         On or about March 15, 2010, MedSense and UMD entered into an “Exclusive Licensing Agreement” (“2010 Licensing Agreement”). (ECF No. 25, ¶ 15). The 2010 Licensing Agreement granted Plaintiff a worldwide, exclusive right and license for certain IP, and patent rights to make and sell certain products, services, and processes concerning PS-2009-085 “Surface Mountable Ultra-Miniature Fiber Optic Pressure Sensor” (“PS-2009-085”). (Id. ¶¶ 15, 20). The sensor technology had been developed by Defendants Yu and Bae, who MedSense had engaged to further assist with working on a “proof of concept” or prototype. (Id., ¶¶ 25-26).

         In or about April 2012, MedSense and UMD agreed to amend the 2010 Licensing Agreement. In addition, in May and July 2012, the 2010 Licensing Agreement was further amended, providing Plaintiff with exclusive license to inventions IS-2012-047 “Optical Interrogation Program for Fiber-Optic Pressure Sensors Based on LabVIEW (“IS-2012-047”) and PS-2012-061 “Smart Multifunctional Optical System-on-a-Chip Sensor Platform and Optical Wireless Sensor Network Node” (“PS-2012-061”). (Id. ¶¶ 19-20). The remaining terms of the 2010 Licensing Agreement remained the same.

         In or about July 2013, the parties entered into an amended and superseding Exclusive Licensing Agreement (“2013 Licensing Agreement”), whereby Plaintiff agreed to provide an increased royalty payment to UMD and to provide equity stakes in MedSense to UMD, Yu, and Bae, as well as other individuals, in exchange for their existing and future work in developing the licensed technology. (Id., ¶ 31). The 2013 Licensing Agreement continued to govern the patent and licensing rights related to PS-2009-085, IS-2012-047, and PS-2012-061, as well as PS-2015-080. (ECF No. 25, ¶¶ 19, 75).

         TEDCO Phase I & III Grants

         In or about August 2013 the Maryland Technology Economic Development Corporation (“TEDCO”) awarded MedSense a $100, 000 grant to facilitate the development of a working proof of concept related to the licensed IP. (Id., ¶ 34). According to Plaintiff, Defendant Yu led the efforts of the Phase I Grant and was involved in sensor design, modeling, and management of the project (Id.). Defendant Bae oversaw sensor development, fabrication and evaluation. (Id.). Thereafter, in or around March 13, 2014, Plaintiff was granted an additional $100, 000 through a TEDCO Phase III Grant, which was used to fund a batch fabrication process of first generation optic sensors, a project led by Defendants Yu and Bae. (Id., ¶ 42).

         MIPS Grant

         On or about August 1, 2014, Plaintiff and UMD entered into Maryland Industrial Partnership Agreement No. 5430 (“MIPS Agreement”) to facilitate additional funding toward further developing the licensed technology. (Id., ¶ 36). As a partner, Plaintiff contributed $10, 000 in cash to UMD and an additional $35, 000 as an “in-kind contribution.”[2] (Id.). Contained within the MIPS Agreement was a clause permitting UMD to publish papers or make public presentations regarding the underlying project, but subject to providing MedSense with a copy of such publication or presentation 30-days prior to the date of submission for MedSense’s review of any company-owned confidential information. (ECF No. 25, ¶ 38). In addition, the MIPS Agreement contained a section that told each party that it had a duty to prevent the disclosure to third parties of confidential information belonging to the other party, and also told each party to not use confidential information for any other purpose not contemplated by the project and without consent of the other party. (Id.).


         Beginning in or about June 2012 until about June 2016, Defendants Yu and Bae published a series of articles allegedly relating to their work during the time that they were involved with MedSense. In a June 2012 article in Optics Express, Vol. 20, No. 13 entitled “Hybrid Miniature Fabry-Perot Pressure Sensor Created Using UV-molding Process with Optical Fiber based Mold, ” Defendants Yu and Bae described the polymer fiber optic sensor and design manufacturing process. (Id., ¶ 44). On or about September 23, 2013, Defendants Yu and Bae, as well as another individual, published an article in Optics Express, Vol. 21, No. 19, entitled “MEMS Fabry-Perot Sensor Interrogated by Optical System-on-a-Chip for Simultaneous Pressure and Temperature Sensing, ” which purportedly described optical system-on-a-chip interrogator for pressure and temperature sensing. (Id., ¶ 48).

         In or around April 2014, Defendants Yu and Bae published an article in the Journal of Lightwave Technology entitled “Hybrid Miniature Fabry-Perot Sensor with Dual Optical Cavities for Simultaneous Pressure and Temperature [M]easurements, ” which purportedly described the drawback of an all polymer miniature fiber optic pressure sensor. (Id., ¶ 45). Thereafter, in 2015, Defendants Yu and Bae published an article in Optics Express entitled “On-Fiber Plasmonic Interferometer for Multi-Parameter-Sensing.” (Id., ¶ 54).

         In or about June 27, 2016, Defendants Yu and Bae published an article in Optics Express, Vol. 24, No. 17, entitled “Low cost, high performance white-light fiber-optic hydroponic system with a trackable working point, ” with co-authors employed by Tianjin University. (Id., ¶ 57). This article described how Fabry-Perot hydrophones suffer from working point drift and the method to correct the issue. (Id.).


         On October 22, 2018, MedSense filed this case in this Court. (ECF No. 1). On January 4, 2019, MedSense filed an Amended Complaint, first asserting that Defendant UMD allowed Defendants Yu and Bae to publish five articles that disclosed MedSense’s trade secrets without its permission, and in violation of its exclusive rights to the IP under the terms of the 2013 Licensing Agreement. (ECF No. 25, Count 1, breach of contract). Second, according to MedSense, Defendants’ actions deprived it of its right to protect from China its trade secrets and its interests in the exclusively licensed IP through publications. (Id., Counts 6 & 7, misappropriation of federal and state trade secret laws). Third, MedSense avers that the Defendants made misrepresentations regarding the viability of the IP and what they would do to promote it, in order to induce MedSense into the 2010 & 2013 Licensing Agreements, the MIPS Agreement, the TAPS Licensing Agreement, among others. (Id., Counts 2 – 4, state tort claims). Fourth, MedSense alleges that Defendants’ actions unjustly enriched them. (Id., Count 8, unjust enrichment). MedSense further contends that Defendants Yu and Bae tortuously interfered with the 2013 Licensing Agreement. (Id., Count 9, tortious interference with contract). Finally, Plaintiff requests a declaratory judgment against all Defendants pursuant to 28 U.S.C. §§ 2201 et seq. (Id., Count 5). Count 1 is solely against USM and UMD, whereas Count 9 is solely against Defendants Yu and Bae in their official and individual capacities. (Id.). Counts 2-8 are against all Defendants. (Id.).


         A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         Pursuant to Federal Rules of Civil Procedure (“Fed. R. Civ. P.”) 12(b)(1), a party may move to dismiss a complaint for lack of subject matter jurisdiction. A Rule 12(b)(1) motion may allege that sovereign immunity serves to be a jurisdictional bar against the claim. Cunningham v. Gen. Dynamics Info. Tech., Inc., 888 F.3d 640, 649 (4th Cir. 2018). When a defendant challenges subject matter jurisdiction, plaintiff bears the burden of establishing that subject matter jurisdiction exists. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999).

         A Rule 12(b)(1) challenge to subject matter jurisdiction may proceed “in one of two ways”: (1) by mounting either a facial challenge, asserting that the allegations pleaded in the complaint are insufficient to establish subject matter jurisdiction; or (2) a factual challenge, asserting “‘that the jurisdictional allegations of the complaint [are] not true.’” Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009) (citation omitted)(alteration in original). In a facial challenge, “the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction.” Kerns, 585 F.3d at 192. In a factual challenge, however, a “district court is entitled to decide disputed issues of fact with respect to subject matter jurisdiction.” Id. Under this scenario, a district court may regard the pleadings as mere evidence on the issue and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Velasco v. Gov’t of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004).

         If a district court finds that subject matter jurisdiction is lacking, then the complaint must be dismissed. Cunningham, 888 F.3d at 649.

         B. Motion to Dismiss for Failure to State a Claim

         When a defendant files a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), it is asserting that, even if you construe the facts advanced in the Plaintiff’s complaint as true, that complaint fails to state a claim upon which relief can be granted. To survive a motion to dismiss, then, a complaint must contain sufficient facts, and must state a “plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Fed. R. Civ. P. 8(a); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (complaint must set forth enough facts as to suggest a “cognizable cause of action”). A claim “has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. The purpose of Rule 12(b)(6) “‘is to test the sufficiency of a complaint and not to resolve contests ...

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