Mass Eye and Ear Inf v. QLT Phototherapeutic

United States Court of Appeals
For the First Circuit

Nos. 03-1682
03-1683
03-1725

MASSACHUSETTS EYE AND EAR INFIRMARY,
Plaintiff/Counterclaim Defendant, Appellant/Cross-Appellee,

v.

QLT PHOTOTHERAPEUTICS, INC.,
Defendant.

QLT, INC.,
Counterclaim Plaintiff, Appellee/Cross-Appellant,

v.

MASSACHUSETTS EYE AND EAR INFIRMARY,
EVANGELOS S. GRAGOUDAS, M.D., JOAN W. MILLER, M.D.,
Counterclaim Defendants, Appellants/Cross-Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

Before

Torruella, Circuit Judge,
Gibson,* Senior Circuit Judge,
and Lipez, Circuit Judge.

Kenneth B. Herman, with whom James F. Haley, Jr., Christopher
J. Harnett, Gerald J. Flattmann, John P. Hanish, Bindu Donovan,

*
Hon. John R. Gibson, of the Eighth Circuit, sitting by
designation.
Fish & Neave, Christine M. Roach, M. Ellen Carpenter and Roach &
Carpenter PC, were on brief, for appellants.
Donald R. Ware, with whom Barbara A. Fiacco, Jessica M.
Silbey, Mark A. Reilly and Foley Hoag LLP, were on brief, for
appellee/cross-appellant.

June 16, 2005

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 TORRUELLA, Circuit Judge. The noble pursuit of curative

technologies birthed Visudyne, a drug that treats the leading cause

of vision loss in people over age fifty. That success involved the

efforts of multiple institutions, and the common drive for

financial returns now brings us a dispute over rights to the income

stream of the fastest growing ophthalmic drug in history.

The entire range of claims articulated by plaintiff-

appellant was dismissed by the district court on summary judgment.

The bulk of the opinion that follows consists of our de novo review

of these dismissals. We must also address defendant-appellee's

cross-appeal of several discovery-related rulings. Following a

review of the factual background, considered in the light most

favorable to the appellant, we will begin our analysis.

I. Factual Background

A. Age-Related Macular Degeneration

Age-related macular degeneration (AMD) is an ocular

disease that is the predominant cause of vision loss in people over

age fifty. The illness takes two forms: "wet" and "dry." The wet

form, though only accounting for ten percent of the cases of age-

related macular degeneration, leads to the debilitating condition

known as choroidal neovascularization ("CNV" or "neovasculature"),

responsible for ninety percent of cases of AMD vision loss.

Neovasculature refers to conditions characterized by the

proliferation of unwanted blood vessels.

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 In 1989, several researchers at Massachusetts General

Hospital's ("MGH") Wellman Laboratories of Photomedicine began

investigating the use of photosensitive drugs to treat eye diseases

such as AMD involving neovasculature. In March 1991, the MGH

researchers met with Dr. Julia Levy of appellee QLT

Phototherapeutic ("QLT") to discuss the possibility of utilizing

benzoporphin derivatives ("BPD" or "derivatives") developed by QLT

for the treatment of AMD. Levy agreed to provide MGH the BPD

needed for research trials.

The Massachusetts Eye and Ear Infirmary ("MEEI" or "the

Infirmary"), a medical institution located next to, but distinct

from, MGH, also sought out QLT's BPD for photodynamic therapy

research. Dr. Joan Miller joined the Infirmary in the fall of 1991

and soon proposed conducting studies using BPD on monkeys. In

March 1992, Miller applied to MEEI to investigate the use of BPD to

treat neovasculature. Pursuant to Dr. Miller's application, MEEI

and QLT signed a material transfer agreement ("MTA") in which MEEI

would receive BPD at no cost in exchange for providing QLT the

results of Miller's pre-clinical studies for use in QLT's

regulatory filings and patent disclosures.

In September 1992, following their successful monkey

trials, which demonstrated the potential use of photodynamic

therapy with BPD, Dr. Miller and her MEEI colleague, Dr. Gragoudas,

presented their data confidentially to QLT representatives visiting

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Boston. Within the next two years, MEEI and QLT entered into two

more material transfer agreements of similar tenor.

B. Confidential Disclosure Agreement

QLT had interest in commercial applications of the

Infirmary's experimental monkey trials and, in May 1993, QLT and

Dr. Miller entered into a Confidential Disclosure Agreement

("CDA"). As part of this agreement, QLT promised "not to use the

Confidential Information for any purpose other than the evaluation

of Products under the terms of this Agreement" and "to maintain

Confidential Information in confidence." The parties agreed that

"misuse or improper disclosure of Confidential Information would

irreparably harm the business of the disclosing party or that

party's affiliates." Pursuant to the CDA, Miller continued to

provide MEEI's confidential research results to QLT, including

results of MEEI research not funded by QLT.

In July 1993, at Dr. Miller's request, QLT agreed to fund

further experiments by the Infirmary involving the treatment of

neovasculature in monkeys with the derivatives. The results of

these studies, as well as other studies not funded by QLT, were

shared with QLT in November 1994, in a report entitled the

Preclinical BPD-MA Pharmacology Study for Macular Degeneration

("Bolus Study").

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 C. QLT Partnership with CIBA Vision

In late 1993, QLT contacted the company CIBA Vision1 to

commercialize the use of photodynamic therapies with BPD to treat

age-related macular degeneration. QLT provided CIBA Vision with

MEEI's confidential research results without first informing MEEI.

In February 1994, CIBA Vision sought full access to Dr. Miller's

research results to pursue a "high potential opportunity." QLT

agreed to share with CIBA Vision the "plans and results of our

ocular programme," which included Dr. Miller's research.

Dr. Miller learned of QLT's negotiations with CIBA Vision

in the Spring of 1994. In March, she expressed concern about the

confidentiality of MEEI's research results to Julia Levy and Edwin

Levy of QLT, who assured her that QLT had not disclosed and would

not disclose in the future any of MEEI's trade secret information.

Dr. Miller then flew to Switzerland "to get CIBA Vision excited in

the technology," but during that meeting, and subsequent meetings

with CIBA Vision representatives in July and October of 1994 she

presented only summaries of her research.

On May 31, 1994, CIBA Vision and QLT executed a Letter of

Intent to enter into a strategic partnership for commercializing

the use of photodynamic therapy to treat neovasculature arising

from age-related macular degeneration. The Letter recognized that

QLT had "significant non-clinical evidence" -- some of which came

1
CIBA Vision is today known as Novartis Ophthalmics, Inc.

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from Miller's research -- showing the success of the therapy for

this application. The Letter indicated that "[e]ach party will

manage the patent portfolio in collaboration with the other party."

QLT announced the partnership to the public and MEEI announced

that:

Researchers at [MEEI] in Boston are
participating in a joint worldwide project
with [QLT] and CIBA . . . to develop
photodynamic therapy, a potential treatment
for certain eye diseases. Infirmary
researchers, since 1992, have performed
pre-clinical studies, in collaboration with
Wellman Laboratories, using Benzoprophin
derivative (BPD), a proprietar y
light-activated drug developed by [QLT].

Clinical trials testing the treatment on humans began in 1995, and

the Infirmary was one of several sites performing the trials under

a written agreement with QLT. MEEI was paid more than one million

dollars for participation in the trials and for the resulting

clinical data.

On February 6, 1995, QLT and CIBA Vision signed a

definitive agreement to pursue worldwide joint development and

commercialization of photo-dynamic therapy for the treatment of

choroidal neovasculature. The partnership aimed to obtain FDA

approval for its treatment, tradenamed Visudyne, in April 2000.

Sales outside the United States began in 1999, and Visudyne

received FDA approval in April 2000. As of February 2002, over two

hundred twenty million dollars' worth of Visudyne had been sold

worldwide.

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 D. Patent Applications

Prior to QLT's partnering with CIBA Vision, in March

1994, Dr. Miller approached QLT about pursuing a patent application

for the treatment. QLT agreed and suggested that Kate Murashige,

its long-standing patent attorney, prepare the application.

Relying on information provided by Miller, Murashige prepared a

patent application with serial number 08/209,473 ("the '473

application") and filed it on March 14, 1994. The claimed

invention applied to methods for treating choroidal neovasculature

with photodynamic therapy using BPD; the named inventors included

only MEEI's Drs. Miller and Gragoudas and another MEEI employee,

Lucy Young.

Even though it was not claiming co-inventorship of the

'473 application, QLT confirmed that it would pay for the

preparation of the application. Murashige told MEEI that "QLT does

not see itself as a participant in the invention other than as a

supplier of the material BPD," and "the assignment would be

entirely to MEEI."

Within months of the '473 filing, however, QLT changed

its approach to the patent strategy. On behalf of QLT, Murashige

proposed to MEEI that the '473 application could be improved upon

by modifying the scope of the patent claims. Murashige argued that

it would strengthen the application to include methods of treating

CNV with photo-dynamic therapy using liposomal formulations of BPD.

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Since QLT's Dr. Levy and the MGH inventors had contributed to the

invention of this form of treatment, the addition of these claims

to the application would make them co-inventors. QLT appreciated

the legal significance of the amplification of inventorship in the

'591 application. Jennifer Kaufman-Shaw, QLT's in-house counsel,

wrote to CIBA Vision that:

at the time the invention was made, there was
no contractual agreement in place whereby QLT
would be entitled to ownership of the
invention. Therefore QLT claims ownership
only through Dr. Julia Levy . . . . If Dr.
Levy were not an inventor, QLT would have no
rights to the patent.

Thus, Murashige convened the three institutions -- QLT, MEEI, and

MGH -- and requested that MEEI and MGH retain their own patent

counsel.

Implementing the proposal entailed a "continuation-in-

part application," with serial number 08/390,591 (the '591

application). At the same time, Murashige removed from the '473

applications those claims directed to methods of treating unwanted

choroidal neovasculature with photodynamic therapy using the

benzoporhin derivatives. Those claims were joined to the '591

application.

After receiving assurances that MEEI would receive fair

compensation for its contributions, the MEEI inventors consented to

the changes, and Murashige filed the '591 application on

February 17, 1995. MEEI's Miller and Gragoudas executed a

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"Combined Declaration of Inventorship and Power of Attorney for

Continuation-in-Part Application," affirming that they were joint

inventors along with the others of those inventions claimed in the

'591 application. Drs. Miller and Gragoudas maintained that they

signed the Declaration of Inventorship and Power of Attorney with

(1) the expectation that the proper inventorship would be

determined once final claims were allowed, and (2) in consideration

for QLT's express promise that MEEI would be compensated

appropriately for Drs. Miller and Gragoudas's contributions through

a license agreement.

On August 25, 1998, the '591 application issued as U.S.

Patent 5,798,349 (the '349 patent). Drs. Miller and Gragoudas

assigned their rights as inventors to the Infirmary, and Drs. Hasan

and Schmidt-Erfurth assigned their rights to MGH. Dr. Levy

assigned her rights to QLT. Among the assignees of the

inventorship of the '349 patent, QLT is distinguished by its

ownership of the patents on the benzoporphin derivatives integral

to the invented treatment. This ownership means that QLT alone can

independently exploit the rights of the '349 patent.

E. Licensing Negotiations

In December 1995, QLT had signed a letter of intent to

negotiate exclusive licenses of MEEI's and MGH's co-ownership

rights in any patent that issued from the pending '591 application.

Such a license would prevent MGH or MEEI from licensing their

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rights under a patent issuing from the '591 application to a

competitor of QLT. According to the letter, "QLT does intend to

negotiate in good faith with MEEI/MGH and other assignees to come

to an agreement on reasonable terms and royalty rates which will be

consistent with industry standards under similar circumstances."

In the same letter, QLT indicated "its intent to negotiate with the

MEEI/MGH for an option to license the technology which is the

subject of the ['473 application]." Negotiations would commence,

according to QLT, once a patent issued and the feasibility of the

invention was proven.

MEEI responded in February 1996 that the Letter of Intent

"is insufficient in that it does not address the issue of how the

Infirmary will participate in the licensing or transferring of MEEI

technology by QLT to third parties." MEEI also accused QLT of

entering into an agreement with CIBA Vision "using, in part,

technology that was developed . . . at the Infirmary." MEEI

concluded, "If that is untrue, please advise us. If that is true,

our position is that the Infirmary should be a party to that

agreement as well as any future agreements relative to that

technology." QLT did not respond to this letter.

II. QLT's Cross-Appeal

The above narrative anticipates the disposition of the

cross-appeal, as the picture we have painted includes information

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that QLT wished never to disclose.2 Because QLT has challenged a

number of evidentiary rulings, we must explain which evidence we

find properly before us.

QLT contends that the district court erroneously ordered

the production of certain attorney-client communications with

Murashige and other attorneys of her firm. The district court

found that QLT met its burden of establishing the prima facie

applicability of the attorney-client privilege to the

communications in question. See Mass. Eye & Ear Infirmary v. QLT

Phototherapeutics, Inc., 167 F. Supp. 2d 108, 115 (D. Mass. 2001)

(accepting report and recommendation of discovery master). Such

communications are privileged unless an exception –- here, the

common-interest exception -- applies. The party challenging the

privilege carries the burden of establishing that any

communications are discoverable. FDIC v. Ogden Corp., 202 F.3d

454, 460 (1st Cir. 2000). The common-interest exception permits a

party access to his joint-client's communications with the shared

counsel. The district court held that the common-interest

exception applied, within a specified time frame and as to certain

2
We note that the existence of MEEI and QLT's common-interest
does not abrogate the attorney-client privilege vis-à-vis the
general public. However, nearly all confidential information
divulged in this opinion has long been available to the public in
the district court discovery opinion of April 13, 2001. Mass. Eye
& Ear Infirmary v. QLT Phototherapeutics, Inc., 167 F. Supp. 2d
108, 110-13. Moreover, we have taken care to recount only those
communications essential to the issues before us, issues that will
also be at the heart of the ongoing litigation.

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matters, thereby granting, in part, MEEI's motion for production of

certain documents. Mass. Eye & Ear Infirmary, 167 F. Supp. 2d at

127-28.

We disturb a district court's discovery management "only

upon a clear showing of manifest injustice, that is, where the

lower court's discovery order was plainly wrong and resulted in

substantial prejudice to the aggrieved party." Mack v. Great Atl.

& Pac. Tea Co., 871 F.2d 179, 186 (1st Cir. 1989). QLT invites us

to conduct a plenary review of the relevant orders, arguing that

whether an exception to the attorney-client privilege applies is a

question of law that deserves de novo review, citing Cavallaro v.

United States, 284 F.3d 236, 245 (1st Cir. 2002). The authority

QLT cites, however, specifies only that the "formulation of . . .

the . . . common-interest doctrine" should be reviewed de novo. Id.

(emphasis added). The application of properly formulated doctrine

to the facts remains a matter of discretion for the district court.

Id.

The discovery master spelled out MEEI's burden as

follows:

MEEI must first establish that MEEI shared an
attorney-client relationship with Morrison &
Foerster [Murashige's law firm] on the
following matters: (1) the preparation and
prosecution of the '473 application (which
issued as the '986 patent); (2) the
preparation and prosecution of the '591
application (which issued as the '349 patent);
(3) the licensing of the '986 patent; and (4)
the licensing of the '349 patent.

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Mass. Eye & Ear Infirmary, 167 F. Supp. 2d at 116-17. QLT asserts

that the discovery master's inquiry was inadequate as a matter of

law because MEEI not only had to show that MEEI and QLT were joint

clients of Morrison & Foerster, but that, in addition, they shared

"an identical (or nearly identical) legal interest as opposed to a

merely similar interest." Ogden, 202 F.3d at 461. QLT argues that

Murashige's legal work for MEEI and QLT regarding the matters was

not directed toward a nearly identical legal interest. Absent

converging interests, parties who shared an attorney ought not have

access to their counsel's communications with the other party.

It is peculiar to address this question first as it

inevitably requires reaching into the merits we have yet to

discuss. But the district court had to do so, as must we. The

irony that the ensuing discovery shows just how polarized the two

parties' interests may already have been is not material to the

inquiry. "A joint attorney-client relationship remains intact

until it is expressly terminated or until circumstances arise that

readily imply to all the joint clients that the relationship is

over." Ogden, 202 F.3d at 463. The rules of discovery therefore

do not insulate from discovery the communications of a duplicitous

party who feigns common interest while scheming otherwise with a

shared, trusted advisor.

We agree, for the reasons elaborated in the master's

recommendation, 167 F. Supp. 2d at 118-23, that QLT and MEEI were

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joint clients of Morrison & Foerster during at least part of

Murashige's representation of the parties for two of the four

matters advanced by MEEI: prosecution of the '473 and '591

applications. Federal patent law shapes and limits the scope of

joint inventors' interest in the successful prosecution of a

patent. Until an event affirmatively terminates the joint-client

relationship of parties relying on the same attorney for that

prosecution, or otherwise "readily impl[ies]" that the relationship

is over, as a matter of law, the joint relationship endures.

Behind the scenes machinations adverse to the joint client are not

necessarily determinative. Id. at 126.

The district court found an endpoint to joint-client

status as of October 1, 1998:

There is no evidence in the record that MEEI's
and QLT's joint attorney-client relationship
with Morrison & Foerster for the preparation
and prosecution of the '473 application, or
for the preparation and prosecution of the
'591 application, was expressly terminated.

However, in a letter dated October 1, 1998,
MEEI informed QLT that MEEI had filed in the
PTO a continuation patent application of the
'591 application. From the record, it is
clear that neither QLT nor Morrison & Foerster
was involved in the preparation or prosecution
of the continuation patent application. Thus,
. . . at least as of October 1, 1998, both
MEEI and QLT understood that their respective
legal interests in the '349 patent were no
longer the same, or nearly the same, legal
interest.
. . .
It is less clear when MEEI's and QLT's
respective legal interests in the '986 patent

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 were no longer the same, or nearly the same,
legal interest . . . . [However], at least as
of October 1, 1998, both MEEI and QLT
understood that their respective legal
interests in the '986 patent were no longer
the same, or nearly the same, legal interest.

Mass. Eye & Ear Infirmary, 167 F. Supp. 2d at 126.

QLT does not disagree, but instead raises as an

alternative argument in its appeal that, if it shared a common

interest with MEEI, the common interest would have terminated more

than a year earlier, at the latest on July 31, 1997. On that date,

MEEI contested, by letter, QLT and MGH's role in the '591

invention. The letter from MEEI's patent attorney, Edmund Pitcher,

to Murashige, expressed MEEI's view that "the entirety of the

subject matter of the allowed claims is the invention of MEEI

personnel only, and that neither Dr. Levy [of QLT], nor Drs. Hasan

or Schmidt [of MGH] made any inventive contribution." Pitcher

noted that "Dr. Levy's presence on the application places MEEI in

the uncomfortable position of being dependent on the fairness of

QLT, despite its directly adverse economic interest, in the

negotiation of a license agreement." The letter included the

demand that QLT:

make a concrete license proposal immediately
and/or file a continuation application to
permit correction of the named inventors. If
the Infirmary and QLT cannot come to an
agreement on a reasonable royalty rate and
other financial terms, we are instructed to
assume responsibility for prosecution of
patent applications covering subject matter

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 invented without the involvement of Dr. Levy
so as to try to preserve MEEI's rights.

QLT responded to the district court's order with a "Motion to Amend

Order as to Date of Termination of 'Common Interest,'" in which

QLT, for further support, drew on letters and memoranda written by

Murashige and employees from QLT and CIBA Vision subsequent to

MEEI's July 31 letter. In QLT's motion, QLT argued that MEEI's

letter implied to QLT that it no longer shared the same interest in

the successful prosecution of the '591 application, as MEEI was

threatening to pursue an alternative and conflicting avenue for

realizing federal protection for its invention. Thus, QLT

contended that "as a matter of fact, as a result of MEEI's July 31,

1997 letter, QLT appreciated that QLT and MEEI no longer shared a

common interest in successfully prosecuting the claimed inventions

in" the '591 application.

The discovery master denied the motion to move the date

of termination of interest forward, finding, in essence, that

MEEI's conflicting interest was only conditional. That is to say,

MEEI shared QLT's interest in the successful prosecution of the

'591 application so long as a reasonable royalty rate was in the

cards. MEEI argues that it "was merely exploring other

possibilities of protecting its rights in the event that QLT did

not live up to its promises once the '349 patent issued," when it

filed the 1997 application. The discovery master discussed how the

letters and memoranda QLT offered supported this interpretation.

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A memorandum drafted by Jennifer Kauffman-Shaw, of QLT, to the QLT-

CIBA Vision Joint Coordinating Committee, dated October 27, 1997,

stated that "the Director of Intellectual Property for MEEI, Carl

Finn, has indicated that if QLT were willing to negotiate a

satisfactory license agreement for the patent, that MEEI would not

pursue the inventorship issue." The master read

the memorandum [to] show[] that QLT understood
that MEEI remained interested in the
successful prosecution of the '591
application. Thus, contrary to QLT's
assertions, the Kaufmann-Shaw Memorandum does
not show that QLT implied, from the Pitcher
Letter and the Finn Letter, that MEEI was no
longer interested in the successful
prosecution of the '591 application.

May 29, 2002, slip op. at 3.3

We believe that whether the common-interest exception

expires upon the implication that a party has a conditionally

adverse interest of the sort at issue here is a question of law

over which we should exercise de novo review. The question is

3
In its original objections to MEEI's motion for production, QLT
argued that an October 21, 1997 letter by MEEI's Carl Finn to QLT's
Dolphin terminated any common interest that might have existed.
Its later motion to terminate the interest as of July 31, 1997
relied upon materials released pursuant to the district court's
order to produce privileged documents. Without entering into a
complicated area of patent law that would require us to ascertain
what QLT would infer from Finn's reference to a "patent application
recently filed on behalf of MEEI," we note that the master's
ultimate conclusion that "the October 21, 1997 letter did not
readily imply that MEEI's and QLT's respective legal interest in
the '591 application was no longer the same or nearly the same,
legal interest," 167 F. Supp. 2d at 131, relies on the same
conditional analysis we deem worthy of de novo review.

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whether a party has "an identical (or nearly identical) legal

interest" with another when (1) they share a nearly identical

interest with regard to one outcome -- here successful prosecution

of the '591 application -- which (2) depends on a condition that

pits the parties against each other –- here, negotiation of a

license on agreeable terms. We believe that it does. Our view is

that the district court correctly focused on the continuing joint

representation of the parties by Murashige as to the '591

application. Insomuch as MEEI hoped to license its rights to the

'591 application to QLT, its objective depended upon that

application's successful prosecution. The fact that one potential

outcome, announced by MEEI in the July 31, 1997 letter, would

render its interests in the '591 application contrary to QLT's did

not of its own force terminate their joint representation as to the

prosecution of that application. Rather, it begs the factual

question of whether Murashige ceased to represent MEEI's interests

as to that prosecution. The discovery master noted that in a

November 25, 1997 letter from Kaufman-Shaw of QLT to MEEI, QLT

indicated that it "was willing to put aside the argument over

inventorship in favor of settling upon an arrangement whereby the

participants in the AMD/ocular neovasculature project would derive

a benefit from their contributions." This letter also proposed a

meeting date between Murashige and MGH employees, CIBA Vision

employees, QLT employees, and MEEI employees. The discovery master

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concluded that this letter "continues to show that QLT did not

readily [infer], from MEEI's letter by Pitcher and Finn, (1) that

MEEI was no longer interested in the successful prosecution of the

'591 application and, (2) as a result, that MEEI and QLT no longer

shared the same, or nearly the same, legal interest, in the '591

application." Accordingly, QLT's motion to amend the date of the

termination of the joint interest was denied. The district court

correctly framed the common-interest exception, and we find that it

was within its discretion in requiring disclosure of communications

between QLT and Murashige of Morrison & Foerster relating to the

prosecution of the '349 and '591 applications up until October 1,

1998.

III. MEEI's Appeal

The pivotal moment that shapes nearly all of MEEI's

claims involves the filing of the continuation-in-part '591

application, which added Dr. Julia Levy of QLT and Drs. Schmidt-

Erforth and Hasan of MGH as inventors on the patent. In the course

of that switch in patent strategy, QLT made numerous assurances to

MEEI that it would license MEEI's patent rights on reasonable

terms. This case is before us because no licensing agreement was

ever reached. MEEI claims that it was injured by this failure, and

further harmed by QLT's unlawful disclosure of MEEI's trade

secrets.

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 A. Contract Claims

1. Breach of Contract

The parties' disagreement regarding the existence of an

enforceable contract is a legal one, and so this court reviews the

question of contract formation de novo. Coady v. Ashcroft & Gerel,

223 F.3d 1, 10 (1st Cir. 2000). The district court determined that

the parties failed to reach an agreement whose terms were

sufficiently determinate to constitute a binding contract. MEEI

counters that the district court erred in failing to recognize that

a valid contract could include terms defined by industry standards.

While there are surely some contracts in which a crucial term could

be sufficiently defined by pegging it to industry standards, we

agree with the district court's conclusion that there is

insufficient evidence in the record to find that the parties had

reached a meeting of the minds. See, e.g., Lucey v. Hero Intern.

Corp., 281 N.E.2d 266, 269 (Mass. 1972) (finding that "'[a]n

agreement to enter into a contract which leaves the terms of that

contract for future negotiation is too indefinite to be enforced'")

(quoting Cygan v. Megathlin, 96 N.E.2d 702, 703 (Mass. 1951)).

MEEI has also claimed breach of contract with regard to

the May 1993 Confidential Disclosure Agreement signed by QLT and

Dr. Miller. We agree with the district court that MEEI was not a

party to this agreement and that there is no evidence that Miller

was acting as an agent of MEEI. Furthermore, MEEI does not fall

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within the limited class of third party beneficiaries who can

enforce a contract to which they are not a party. Under

Massachusetts law, in order for a third party to enforce a

contract, "[i]t must appear from 'the language and circumstances of

the contract' that the parties to the contract 'clear[ly] and

definite[ly]' intended the beneficiaries to benefit from the

promised performance." Miller v. Mooney, 725 N.E.2d 545, 550

(Mass. 2000) (quoting Anderson v. Fox Hill Vill. Homeowners Corp.,

676 N.E.2d 821, 822 (Mass. 1997)). Nothing in the language of the

Confidential Disclosure Agreement indicates that MEEI was meant to

be either a party or a third party beneficiary. QLT was listed as

a party, and a vice president of the company signed for QLT. In

contrast, Dr. Miller signed only in her personal capacity without

reference to MEEI. Furthermore, the mere fact that MEEI would

likely benefit from such an agreement does not, by itself, show

that MEEI was an intended rather than an incidental beneficiary.

See Miller, 725 N.E.2d at 550 (citing Restatement (2d) of Contracts

§ 302 (1981)). Thus, MEEI cannot pursue a claim for breach of

contract as a third party beneficiary based on the Confidential

Disclosure Agreement.

2. Breach of Implied Contract

We construe MEEI's breach of implied contract claim to be

a claim of contract implied-in-fact rather than contract implied-

in-law. Although both causes of action exist in Massachusetts,

-22-
MEEI has argued principally that it reached an actual, enforceable

agreement with QLT that was implied by the dealings of the two

parties. MEEI's implied-in-law oriented arguments will be

addressed in this court's analysis of the unjust enrichment claim.

See 1 Richard A. Lord, Williston on Contracts § 1:6 (4th ed. 2004).

"A contract implied in fact requires the same elements as

an express contract and differs only in the method of expressing

mutual assent." 6 William Meade Fletcher et al., Fletcher

Cyclopedia of the Law of Private Corporations § 2580 (perm. ed.

rev. vol. 2004). Thus, MEEI's implied contract claim fails for the

same reason we have rejected its express contract claim -- failure

to reach agreement on the basic terms of the contract. In the

prototypical implied contract case, the terms are already

sufficiently clear, and the court looks to the actions of the

parties only to determine whether their actions indicate that they,

in fact, agreed on those terms. However, in this case, where the

terms proposed by each side remain at odds, searching the actions

of the parties for indicia of consent becomes a fruitless exercise.

Without agreement on the essential terms of the agreement, MEEI's

implied contract claim gets no further than does its express

contract claim.

3. Breach of Covenant of Good Faith and Fair Dealing

Having concluded that no contract exists, there can be no

derivative implied covenant of good faith and fair dealing

-23-
applicable to these parties. Under Massachusetts law, "[t]he

covenant of good faith and fair dealing is implied in every

contract." UNO Rests., Inc. v. Boston Kenmore Realty Corp., 805

N.E.2d 957, 964 (Mass. 2004). "The covenant may not, however,

create rights and duties not otherwise provided for in the existing

contractual relationship, as the purpose of the covenant is to

guarantee that the parties remain faithful to the intended and

agreed expectations of the parties in their performance." Id. In

other words, the implied covenant of good faith and fair dealing

governs conduct of parties after they have entered into a contract;

without a contract, there is no covenant to be breached. Where, as

here, the parties have not yet reached a binding agreement, there

is no duty to negotiate in good faith. See Levenson v. L.M.I.

Realty Corp., 575 N.E.2d 370, 372 (Mass. App. Ct. 1991) (rejecting

the argument that where defendant stopped short of binding himself

to a contract he nevertheless had a duty to negotiate the terms in

good faith).

B. Conversion and Misrepresentation Claims

1. Conversion

MEEI claims that QLT converted MEEI's intellectual

property rights in the invention of the photodynamic therapy "by

causing MEEI to file a joint patent application with MGH and QLT so

that a patent issued would name employees of all these institutions

as inventors." "Conversion requires the exercise of dominion or

-24-
control over the personal property of another." Third Nat'l Bank

of Hampden Cty. v. Cont'l Ins. Co., 446 N.E.2d 380, 383 (Mass.

1983). However, MEEI agreed to the filing of the joint patent

application. From the moment QLT became a co-inventor of the '349

patent, it too had full and equal rights to exploit the patented

intellectual property. Under a more refined statement of

Massachusetts law, only a defendant that "wrongfully exercises acts

of ownership" has committed conversion. In re Halmar Distribs.,

Inc., 968 F.2d 121, 129 (1st Cir. 1992) (emphasis added) (internal

citation omitted). Since QLT jointly owned the property at issue

and since it did nothing to prevent MEEI from exercising its own

rights in the property, QLT did not "wrongfully exercise acts of

ownership," id., and thus, no conversion occurred. Hence, it is

unnecessary for us to address the district court's analysis of

whether intangible property, such as patent rights, can be the

subject of a conversion claim.

2. Misrepresentation

MEEI claims that QLT falsely represented to MEEI that

MEEI would be adequately compensated for its role in the inventions

included in the '349 patent. In order to succeed on its

misrepresentation claims, MEEI must show that QLT did not intend to

comply with these representations at the time they were made. See

Doyle & H.P. Leasing, Inc. v. Hasbro, Inc., 103 F.3d 186, 194 (1st

Cir. 1996) ("plaintiffs must allege (1) that the statement was

-25-
knowingly false; (2) that [defendants] made the false statement

with the intent to deceive; (3) that the statement was material to

the plaintiffs' decision . . . ; (4) that the plaintiffs reasonably

relied on the statement; and (5) that the plaintiffs were injured

as a result of their reliance") (citations omitted). Since MEEI

does not provide sufficient evidence for a reasonable jury to draw

this conclusion, we affirm the district court's grant of summary

judgment.

C. MEEI's Motion to Amend

"We review the denial of a motion to amend under Rule

15(a) for an abuse of discretion, and we defer to the district

court if any adequate reason for the denial is apparent on the

record." Steir v. Girl Scouts of the USA, 383 F.3d 7, 12 (1st Cir.

2004) (internal quotations omitted). In the instant case, we

cannot say that the district court abused its discretion in denying

MEEI's motion to amend its complaint concerning its unjust

enrichment claim and to include a claim of promissory estoppel.

MEEI made its motion to amend more than two years after

filing the complaint, after the court had entered summary judgment

for QLT on Counts I-IV of MEEI's complaint and the parties had

fully briefed summary judgment arguments on the remaining four

counts. "Where the motion to amend is filed after the opposing

party has timely moved for summary judgment, a plaintiff is

required to show 'substantial and convincing evidence' to justify

-26-
a belated attempt to amend a complaint." Id. (quoting Resolution

Trust Corp. v. Gold, 30 F.3d 251, 253 (1st Cir. 1994)). The

district court did not abuse its discretion in determining that

MEEI has failed to meet its burden of showing "some valid reason

for [its] neglect and delay."4 Acosta-Mestre v. Hilton Int'l of

Puerto Rico, Inc., 156 F.3d 49, 52-53 (1st Cir. 1998) (internal

quotations omitted). Although the summary judgment motions already

filed necessarily did not apply to MEEI's newly proposed promissory

estoppel theory, given the undue delay in raising this theory, the

district court acted within its discretion in denying MEEI's motion

to amend.

D. Unjust Enrichment

The district court believed that MEEI's unjust enrichment

claim "distill[ed] into a disagreement over the inventorship in the

'349 patent." Based on that premise, the district court reasoned

that MEEI could not use a Massachusetts unjust enrichment claim to

circumvent federal patent law, and accordingly, granted summary

judgment to QLT. We find, however, that the district court

4
MEEI points to Corey v. Look as an instance where this court
allowed the plaintiff to amend a complaint despite the fact that
the "motion to amend came 15 months after the Authority's motion to
dismiss." 641 F.2d 32, 38 (1st Cir. 1981). In that case, however,
the plaintiff sought only to incorporate facts in the complaint
that had been discovered from interrogatories. Id. Here, plaintiff
seeks to add an entirely new legal theory. Furthermore, in Carey,
we decided only that it would have been within the district court's
discretion to allow amendment, not, as MEEI's urges here, that the
district court abused its discretion by denying the amendment. Id.

-27-
misinterpreted MEEI's unjust enrichment claim, and in light of our

interpretation of the claim, we find summary judgment

inappropriate.

While the proper inventorship of either the '473

application or the '591 application is indeed a non-negotiable

question of federal law, the question of which application to

prosecute was a choice available to the parties. Under the U.S.

patent scheme, inventors have discretion to articulate the scope of

their patent claims. Donald S. Chisum, 3-8 Chisum on Patents,

§ 8.06[4], at 8-247 (2003) ("An applicant may present more than one

claim and is afforded reasonable latitude in varying the scope and

terminology with which he defines his invention."). MEEI's

original '473 application's primary claim involved three main green

porphyrin-based methods: a "method to treat conditions of the eye

characterized by unwanted neovasculature" (claim 1); a "method to

treat pigmented tumors in the eye" (claim 10); and a "method to

observe the condition of blood vessels in the eye" (claim 19). The

three methods had much in common: each claim involved administering

green porphyrin, which would then localize in the blood vessels in

the eye; the diagnostic method simply involved observing the

vessels, and the two treatment methods involved irradiating the

neovasculature or tumor with light. Furthermore, each method had

an associated but separate claim that specified that "said green

porphyrin is contained in a liposomal preparation" (claims 7, 16,

-28-
and 24). Based on these claims, Murashige explained in March 1994

that "QLT does not see itself as a participant in the invention

other than as a supplier of the material BPD."

In December 1994, Murashige suggested substantially

changing the scope and inventorship of the '473 application.

First, she recommended spinning off the diagnostic method as a

separate patent which would be "properly assignable solely to

MEEI." Second, she recommended combining the separately stated

methods for treatment of neovasculature (claim 1) and treatment of

pigmented tumors (claim 10) into a single method. The goal was to

"be able to claim treating conditions of the eye more broadly,"

i.e., expand the scope of the patent. In order to do this,

however, it was necessary to "introduce the limitation of using the

green porphyrin in a liposomal composition." To this end,

Murashige proposed a modified claim 1 that claimed "administering

. . . green porphyrin in a liposomal composition." As Murashige

acknowledged, that "is substantially the same as claim 1 in the

original case except that the limitation of using a liposomal

composition has been included."

Murashige explained the significance of this proposal.

On the one hand, by broadening claim 1 "to claim treating

conditions of the eye more broadly," the patent, if granted, would

have "potentially broader coverage than contemplated [earlier]."

But the only way to justify these broad claims was to "introduce

-29-
the limitation of using the green porphyrin in a liposomal

composition," which, Murashige explained, was "a liberating device,

allowing us to claim more broadly."

However, this change to claim 1 broadened not just

coverage of potential eye treatments, but also the list of

inventors. Murashige explained that "if we include conditions of

the eye generally using liposomal compositions, . . . a larger

circle of inventors would be included both because of this greater

breadth and by virtue of the necessity to supply the green

porphyrin in liposomes. It then appears that the inventorship

would properly include . . . Julia Levy . . . ." In other words,

the very aspect of the application that was "a liberating device,

allowing [the inventors] to claim more broadly" also happened to be

the aspect of the revised application that would require adding Dr.

Levy as an inventor. (Conversely, had liposomal preparations not

been claimed at all, arguably the patent would be less valuable,

but Dr. Levy might not be an inventor.) Adding Dr. Levy, of

course, would give QLT full co-ownership rights to exploit the

patent. Thus, QLT presented MEEI with a second viable formulation

of its patent application: it asked MEEI to change the scope of its

patent application to QLT's benefit in exchange for fair

compensation.5

5
At times, both parties have disputed the inventor status of the
other party. QLT has questioned MEEI's exclusive role in the
claims listed in the '473 application, and MEEI has challenged

-30-
 MEEI already possessed a valid, and seemingly defensible,

patent application, when QLT sought MEEI's assent to replace the

'473 application with the '591 application.6 QLT acknowledged that

the patent as MEEI envisioned it (without Levy and her claims)

would be difficult to challenge on grounds of either obviousness or

noninventorship. Nevertheless, QLT argued that the patent could be

made stronger -- in some ways both broader and more defensible --

by changing the scope of the patent and adding the additional

inventors who participated in the new claims. The addition of QLT

inventor Dr. Levy, however, would drastically reduce MEEI's

potential profits from the patent. If MEEI agreed to the '591

application with the additional inventors, QLT would no longer need

a license in order to commercialize the photo-dynamic therapy that

became known as Visudyne. Since QLT already owned the other

QLT's participation in the claims added in the '591 application.
However, we find that at this summary judgment stage, the record
does not contradict the listed inventors on either application, and
we assume that both applications were valid.
6
The '591 application (later approved as the '349 patent) also
added Drs. Schmidt-Erfurth and Hasan of MGH. It is appropriate to
note here that, in addition to their primary arguments about
federal preemption, the district court and QLT rely on the fact
that QLT also purchased a license to MGH's co-ownership rights in
the '349 patent. Given this license, QLT points out that it would
still have full rights to exploit the patent even if QLT, itself,
had not played any role in the inventorship. This argument, though,
misses the mark entirely, as it ignores the fact that MGH, like
QLT, only has rights to the core inventions covered by the original
'473 patent because MEEI agreed to the later '591 application.
QLT's redundant licensing scheme with MGH in no way undermines
MEEI's argument that it consented to proceed with the '591
application on based on QLT's assurances of fair compensation.

-31-
required patent for the necessary BPD, QLT's inclusion in the new

'591 application enabled it to commercially exploit Visudyne

without MEEI. We note that QLT was, of course, well aware that

securing co-inventorship would put it in this uniquely lucrative

position, and it was QLT's attorney, Murashige, who, acting also as

patent counsel to MEEI, spearheaded the effort to convince MEEI to

go along with the '591 application.

Not surprisingly, MEEI did not initially agree with this

new approach proposed by QLT. Attorney Murashige nevertheless

prepared the '591 continuation-in-part application, and MEEI

eventually assented after being promised fair compensation for its

contribution. Of course, MEEI and QLT never came to an agreement

on the critical compensation figures, and it is for that reason

that we have affirmed summary judgment for QLT on MEEI's contract

claims. This inadequate meeting of the minds does not, however,

call for summary judgment in the context of unjust enrichment. A

claim of unjust enrichment is appropriate "where an agreement is

too indefinite to be enforced . . . [or] where no contract is made

because each of the parties had a materially different

understanding of the terms." 1-1 Corbin on Contracts, § 1.20(b)

(2004). Unjust enrichment provides an equitable stopgap for

occasional inadequacies in contractual remedies at law by mandating

that "[a] person who has been unjustly enriched at the expense of

another is required to make restitution to the other." Fox v. F &

-32-
J Gattozzi Corp., 672 N.E.2d 547, 552 (Mass. App. Ct. 1996)

(quoting Restatement of Restitution § 1 (1937)). Although QLT's

continued reassurances that it would pay MEEI royalty rates

"consistent with industry standards" were not specific enough to

support MEEI's contract claims, they form a key component of MEEI's

unjust enrichment claim and present a triable issue of fact.7

Furthermore, this analysis of MEEI's unjust enrichment

claim illustrates why it was not preempted by federal patent law.

MEEI's claim is not that Dr. Levy was not a proper inventor of the

'349 patent, but rather that QLT induced MEEI to agree to the

change in scope of the claims, and then unjustly profited from that

change by denying fair compensation. In these circumstances,

conflict preemption, not the broader field preemption, is

appropriate. See Hunter Douglas, Inc. v. Harmonic Design, 153 F.3d

7
QLT argues that MEEI did not give up anything by agreeing to the
'591 application. It contends that MEEI retained the right to file
a continuation application in its own behalf under 35 U.S.C. § 120,
and in fact did exactly that by "secretly" filing continuation
applications that claimed the full range of treatment methods as
MEEI's sole invention. We need not address this issue because a
claim seeking restitution for unjust enrichment does not require
consideration. In Massachusetts, the elements of such a claim are
"'unjust enrichment of one party and unjust detriment to the other
party.'" Bushkin Assocs., Inc. v. Raytheon Co., 906 F.2d 11, 15
(1st Cir. 1990) (quoting Salamon v. Terra, 477 N.E.2d 1029, 1031
(Mass. 1985)). Thus, MEEI need only establish that QLT was
unjustly enriched, and that MEEI suffered an unjust detriment.
MEEI argues that, as a result of QLT's unjust conduct during
negotiations and/or patent prosecution, MEEI has received no
royalties at all, and, by not having to pay those royalties, QLT
has retained large sums that it would have had to forego if it had
not committed that allegedly unjust conduct. If so, the elements
of a quasi-contract claim might be established.

-33-
1318, 1334-35 (Fed. Cir. 1998). Under the conflict preemption

standard, if the tort action is based on conduct that is not

"protected or governed by federal patent law," then "the remedy is

not preempted." Id. at 1335; compare Univ. of Colo. Found., Inc.

v. Am. Cyanamid Co., 196 F.3d 1366, 1372 (Fed. Cir. 1999)

(independent state law inventorship standards frustrate basic

objectives of patent law and thus entire field of inventorship is

preempted) with id. at 1373-74 (unjust enrichment claim preempted

only because it "hinge[d]" on a determination of inventorship).

QLT argues that MEEI's claims are preempted by 35 U.S.C.

§ 262, which reads: "In the absence of any agreement to the

contrary, each of the joint owners of a patent may make, use, offer

to sell, or sell the patented invention within the United States,

or import the patented invention into the United States, without

the consent of and without accounting to the other owners."

(Emphasis added). QLT contends that § 262 creates a federal right

to practice an invention without fear of suit by co-inventors,

preempts state law claims between co-owners on the basis of

anything other than a written contract, and/or effectively

represents a Congressional determination that any asserted wrong by

one co-inventor against another is not "unjust" unless it violates

such a contract.

We recognize that the preemption issue here is close. It

is true that allowing MEEI's claim to proceed would, to some

-34-
extent, impinge upon QLT's rights as a co-inventor. However, the

statute itself admits of an exception to those rights when there is

"any agreement to the contrary." QLT suggests that this exception

only applies where there is a written, legally enforceable

contract. But § 262 says no such thing. Congress knew how to

insist upon a contract, and even how to specify that it must be

reduced to writing. Cf. 35 U.S.C. § 261 (holding that patent

rights are "assignable in law by an instrument in writing")

(emphasis added). However, § 262 simply speaks of "any

agreement." MEEI has provided evidence of an agreement with QLT

in which QLT promised to "negotiate in good faith with MEEI . . .

to come to an agreement on reasonable terms and royalty rates which

will be consistent with industry standards under similar

circumstances." We have held, supra Part III.A.1, that this

agreement was not enforceable as a contract, because the terms are

too indefinite. However, if the fact-finder determines that there

was such an agreement, it might still qualify as an "agreement"

under § 262, and therefore form the basis for equitable relief on

a theory of unjust enrichment without presenting any conflict with

the allegedly preempting statute.

We also note that, while there is no direct precedent

concerning preemption under § 262, we may draw analogies from other

situations where patent law preemption has been alleged.

-35-
 First, there is precedent suggesting that a state law

action alleging that the defendant secretly filed and received a

patent for the plaintiff' invention, and requesting monetary or

equitable relief but not a change to the patent itself, is not

preempted. See Becher v. Contoure Labs., 279 U.S. 388 (1929)

(Holmes, J.);8 Burns v. Mass. Inst. of Tech., 394 F.2d 416 (1st

Cir. 1968) (Aldrich, C.J.);9 Laning v. Nat'l Ribbon & Carbon Paper

8
In Becher, an inventor employed Becher as a machinist to help
work on his invention, under a confidentiality agreement. Becher
secretly applied for and received a patent for the invention. The
inventor sued in state court for breach of contract and other state
theories, and the state court ordered a constructive trust on the
patent rights, i.e., ordered Becher to assign the rights to the
inventor. Becher sued in federal court to enjoin the inventor from
further state court proceedings on the grounds of patent
preemption. Justice Holmes held that the inventor's claims were
not preempted:

[The inventor]'s right was independent of and prior to
any arising out of the patent law, and it seems a strange
suggestion that the assertion of that right can be
removed from the cognizance of the tribunals established
to protect it by its opponent going into the patent
office for a later title. It is said that to establish
[the inventor]'s claim is to invalidate Becher's patent.
But, even if mistakenly, the attempt was not to
invalidate that patent but to get an assignment of it,
and an assignment was decreed. Suits against one who has
received a patent of land to make him a trustee for the
plaintiff on the ground of some paramount equity are well
known.

279 U.S. at 391.
9
In Burns, the plaintiff had been negotiating with a federal
agency regarding some unpatented inventions. The government asked
MIT to evaluate his ideas, and Burns turned over secrets to MIT
pursuant to a confidentiality agreement. MIT gave the government
an unfavorable report on his ideas, but then secretly developed and
patented them. Burns sued for state law breach of trust. The

-36-
Mfg. Co., 125 F.2d 565, 566-67 (7th Cir. 1942) (action to determine

title to assigned patent rights under state law is not preempted);

Kleinerman v. Snitzer, 754 F. Supp. 1 (D. Mass. 1990);10 Zemba v.

Rodgers, 210 A.2d 95, 98 (N.J. Super. Ch. 1965);11 see also Corpus

court applied the Massachusetts statute of limitations, and held
that his claim was untimely. The court never even hinted that his
claim was preempted.
10
In Kleinerman, the inventor sued in state court alleging that
defendant Snitzer "breached the trust implied in plaintiff's
disclosure to him of plaintiff's technology and knowingly
misappropriated plaintiff's technology, to plaintiff's detriment,"
and that another defendant, the patent attorney, helped Snitzer to
do so. Id. at 1-2. The complaint sought damages, not correction
of inventorship or invalidation of the patent. Defendants argued
that the complaint was preempted by patent law and sought to remove
to federal court on the basis of federal question jurisdiction.
The court held that, since the plaintiff never obtained a patent
for the technology he claims that he invented, he therefore was not
seeking to enjoin a defendant from infringing on his patent, but
rather seeking damages for common law torts. It remanded the case
for want of federal jurisdiction. Id. at 2.
11
In Zemba, plaintiff and Rodgers separately invented the same
product, then decided to jointly apply for a patent. A patent
attorney was consulted. Rodgers and the attorney then allegedly
conspired to process the patent application without plaintiff, and
to represent Rodgers as the sole inventor. See id. at 96.
"Rodgers falsely and fraudulently told plaintiff that the invention
was unpatentable, that an application would be rejected, and that
he had doubt as to whether the patent application would be
pursued." Id. With the help of the patent attorney, Rodgers filed
and received the patent. Plaintiff sued in state court for fraud
and various other state law theories. Defendants argued that the
claims were preempted by patent law and subject to exclusive
federal jurisdiction. See id. at 97-98. The court rejected the
claim of preemption, explaining:

[The complaint] depends on principles of common law and
equity governing fraud and disparagement, and plaintiff's
rights are dependent upon such principles. Plaintiff has
not sought a declaratory judgment to void the patent on
the federal grounds of non-invention. Nor has he based

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Juris 2d Patents § 315 ("[I]n the absence of any agreement to the

contrary, each of the joint owners of a patent may make, use, offer

to sell, or sell the patented invention . . . unless such profits

accrue after a joint owner has procured an assignment of his

coowner's interest to himself by fraud.") (emphasis added)

(footnotes omitted) (citing Zemba).

Here, the allegation is that the defendant manipulated

the plaintiff into agreeing to change the scope of the patent so as

to include contributions made by the defendant. MEEI has not

provided evidence that QLT's alleged conduct was actually

fraudulent. However, arguably, the case for preemption here is

weaker than in the cited cases. In the cited cases, the plaintiff

struck at the heart of inventorship by arguing (essentially) that

the patent was applied for fraudulently and never should have

issued. Here, the plaintiff argues that the defendant induced

plaintiff to agree to a certain scope of invention in exchange for

compensation, and then provided none.

his claim for disparagement on the invalidity of the
patent. Instead, plaintiff claims ownership of an
interest in the patent, and demands an assignment of that
interest and damages resulting from slander of his
ownership.

210 A.2d at 98 (internal citations omitted).

-38-
 We also draw an analogy from the doctrine of inequitable

conduct before the Patent and Trademarks Office (PTO).12 Courts

have distinguished state claims alleging bad faith misconduct by

the applicant against the PTO -- which are preempted -- from state

claims alleging bad faith misconduct occurring subsequently in the

marketplace -- which are not. See, e.g., Methode Elecs. Inc. v.

Hewlett-Packard Co., 55 U.S.P.Q.2d 1602, 1604-05 (N.D. Cal. 2000)

(finding that an unjust enrichment claim alleging bad faith

misconduct by the applicant against the PTO was preempted because

its "fundamental premise" was incorrect inventorship, but making

the distinction described above, and emphasizing that "the focal

point of the [instant case] is Methode's conduct before the PTO and

not . . . conduct subsequent to the PTO proceedings."). The reason

for this distinction is instructive: claims of inequitable conduct

before the PTO are preempted because "PTO procedures themselves

provided a remedy for [an applicant]'s malfeasance. An additional

state action would be an inappropriate collateral intrusion on the

regulatory procedures of the PTO, 'under the guise of a complaint

sounding in tort' . . . and is contrary to Congress' preemptive

regulation in the area of patent law." Abbott Labs. v. Brennan,

12
"Applicants for patents are required to prosecute patent
applications in the PTO with candor, good faith, and honesty."
Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995).
"A breach of this duty constitutes inequitable conduct." Id. If
the conduct was sufficiently culpable, a court may declare the
patent to be unenforceable. Id.

-39-
952 F.2d 1346, 1357 (Fed. Cir. 1991) (internal citations omitted).

In other words, state claims alleging misconduct before the PTO are

preempted because federal law contains a specific remedy for just

such misconduct. Even then, not all state claims that implicate

the issue of inequitable conduct before the PTO are preempted. See

Dow Chem. Co. v. Exxon Corp., 139 F.3d 1470, 1471 (Fed. Cir. 1998)

(state law tort claim for intentional interference with contractual

relations that implicates patent law issue of inequitable conduct

before PTO is not preempted by federal patent law, even if it

requires state court to adjudicate question of federal patent law,

provided state law cause of action includes additional elements not

found in federal patent law cause of action and is not

impermissible attempt to offer patent-like protection to subject

matter addressed by federal law).

Again, this precedent is not directly on point. The

distinction cited above is between state claims alleging misconduct

by an applicant against the PTO (which are usually, if not always,

preempted), and claims alleging misconduct between parties after

the patent has issued. Here, the claim is misconduct by an

applicant against a co-applicant before the application is

completed. But misconduct between parties before the patent

issues is more analogous to misconduct between parties after the

patent issues than it is to misconduct by a party against the PTO.

-40-
 Finally, we note that QLT's position, while it has the

advantage of creating an easily manageable bright-line rule, could

lead to injustices that Congress did not intend. Purely as a

hypothetical, imagine a case where the evidence clearly showed that

the defendant deceived and manipulated a naive inventor into

modifying the scope of the inventor's application (within the range

of properly patentable applications) so as to force the inclusion

of the defendant as a co-inventor. Further suppose that the

defendant deflected all requests for a legally enforceable

licensing contract with empty assurances of future agreements which

it never intended to fulfill. We cannot imagine that Congress

intended, simply by enacting the phrase "[i]n the absence of any

agreement to the contrary," to preclude the inventor-plaintiff from

establishing such an agreement within the framework of an equitable

cause of action under state law. Conflict preemption applies only

when "there is such a direct conflict between . . . the patent code

and . . . [state] law that compliance with both the patent law and

state law is a 'physical impossibility,' or . . . the state law

'stands as an obstacle to the accomplishment and execution of the

full purposes and objectives of Congress' in enacting" the federal

statute. Cover v. Hydramatic Packing Co., 83 F.3d 1390, 1393 (Fed.

Cir. 1996) (quoting Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505

U.S. 88, 98 (1992)). We do not find such a "direct conflict" here,

and while the present case differs from the hypothetical, the

-41-
differences lie in the facts and equities, not the law of

preemption.

For all these reasons, MEEI's unjust enrichment claim is

not preempted.

We also find that MEEI's unjust enrichment claim should

survive summary judgment based on the allegations of QLT's misuse

of confidential information. Under Massachusetts law, "[a]

constructive trust is . . . imposed to avoid the unjust enrichment

of one party at the expense of the other where 'information

confidentially given or acquired was used to the advantage of the

recipient at the expense of the one who disclosed the

information.'" Mass Cash Register, Inc. v. Comtrex Sys. Corp., 901

F. Supp. 404, 423 (D. Mass. 1995) (quoting John Alden Transp. Co.

v. Arnold Bloom, 415 N.E.2d 250, 250 (Mass. App. Ct. 1981)). The

facts underlying this theory will be laid out in the course of our

subsequent trade secret claim analysis.13

E. Trade Secret and Unfair Trade Practices Claims

The right to control how research is used and who is

privy to trade secrets is crucial to protecting the economic

interests of non-profit research institutions like MEEI, just as it

is essential to for-profit businesses. Without the ability to

guard their own data, there would be fewer incentives for

13
Although MEEI cannot recover twice for the same conduct, MEEI
should have the opportunity to prove the distinct elements of its
unjust enrichment and trade secret claims.

-42-
institutions like MEEI to engage in this type of cutting-edge

research. The allegations before this court are that QLT was

entrusted with the result of MEEI's research and breached that

trust, primarily by sharing information with its partner CIBA

Vision without authorization from MEEI. We now consider whether

the district court correctly found that these claims were brought

by MEEI after the statute of limitations had already run.

1. Misappropriation of Trade Secrets

MEEI claims that QLT misappropriated its trade secrets

without MEEI's knowledge, in particular, by disclosing certain

research results to QLT's eventual partner, CIBA Vision. MEEI

argues that the district court erred in concluding that MEEI's

trade secret claim was time barred by the three-year statute of

limitations for tort actions because, under Massachusetts law, the

statute should have been tolled.

Massachusetts law establishes two avenues by which the

three-year statute of limitations that would ordinarily apply to

MEEI's trade secret claims can be tolled. The Massachusetts common

law "discovery rule" provides that the statute of limitations is

tolled "until a plaintiff knows, or reasonably should have known,

that it has been harmed or may have been harmed by the defendant's

conduct." Taygeta Corp. v. Varian Assocs., Inc., 763 N.E.2d 1053,

1063 (Mass. 2002). "The appropriate standard to be applied when

assessing knowledge or notice is that of a 'reasonable person in

-43-
the plaintiff's position.'" Id. (citing Riley v. Presnell, 565

N.E.2d 780, 785 (Mass. 1991)). Thus, under Massachusetts'

discovery rule, the question before the district court was when

MEEI actually knew or should have known of QLT's misappropriations

of its trade secrets.

Massachusetts statutory law also grants a reprieve from

the statute of limitations when a potential defendant fraudulently

conceals the basis for a cause of action:

If a person liable to a personal action
fraudulently conceals the cause of such action
from the knowledge of the person entitled to
bring it, the period prior to the discovery of
his cause of action by the person so entitled
shall be excluded in determining the time
limited for the commencement of the action.

Mass. Gen. Laws ch. 260, § 12 (2004). Under this law, the statute

of limitations "will be tolled if the wrongdoer either concealed

the existence of a cause of action through some affirmative act

done with intent to deceive or breached a fiduciary duty of full

disclosure." Stark v. Advanced Magnetics, Inc., 736 N.E.2d 434,

442 (Mass. App. Ct. 2000) (quotations and citations omitted). "The

statute of limitations, however, is not tolled if the plaintiff has

actual knowledge of the facts giving rise to his cause of action."

Id.

The district court made short work of MEEI's trade

secrets claims by finding that MEEI had actual knowledge of its

claims more than three years before bringing this suit on April 24,

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2000. Since the district court concluded that there were

sufficient facts to prove MEEI's knowledge of its claims, it did

not need to go any further in analyzing the tolling of the trade

secret claims under either the common law discovery rule or the

fraudulent concealment statute. However, we must evaluate the

district court's factual conclusions to determine whether they

supported summary judgment.

a. Review of District Court Summary Judgment Decision

Summary judgment is appropriate when "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled

to judgment as a matter of law." Fed. R. Civ. P. 56(c). Since

genuine issues of material fact remain concerning MEEI's knowledge

of QLT's misappropriations of its trade secrets -- facts that could

bring MEEI's claims within the statute of limitations -- we find

that the court erred in granting summary judgment on MEEI's trade

secret claims.

"Our review of the district court's grant of summary

judgment is plenary, and we read the record in the light most

amicable to the party contesting summary judgment." Cambridge

Plating Co. v. Napco, Inc., 991 F.2d 21, 24 (1st Cir. 1993)

(reversing the district court grant of summary judgment because

material facts remained at issue where plaintiff knew it had been

-45-
harmed, but could not attribute it with certainty to defendant's

actions). Considered in the light most favorable to MEEI, neither

the facts singled out by the district court, nor the record as a

whole, suffice to support the district court's conclusion that MEEI

had knowledge of trade secret misappropriations. The district

court based its conclusion on, inter alia, MEEI's awareness of

QLT's partnership with CIBA Vision, Dr. Miller's statements that

she was concerned about the confidentiality of her work, and

Dr. Miller's learning from CIBA Vision that some of her data had

been shared without her permission. However, it is not enough to

show that Dr. Miller was suspicious about what QLT might have

disclosed. "Suspicion and knowledge are poles apart on a continuum

of understanding," and "the [Massachusetts fraudulent concealment]

statute itself uses the unqualified word 'knowledge' in setting

forth the prescribed state of a plaintiff's perception."

Tracerlab, Inc. v. Indus. Nucleonics Corp., 313 F.2d 97, 102 (1st

Cir. 1963). We will address the question of MEEI's admitted

knowledge of some disclosures below.

The district court seems to have given little weight to

MEEI's claims that QLT repeatedly reassured Miller that it was not

disclosing any confidential information. Rather, the district

court found that in a 1996 letter to QLT, MEEI indicated that it

-46-
was already aware of its trade secrets cause of action.14 The

letter stated in part, "[w]e believe that you may have already

entered into an agreement with a third party using, in part,

technology that was developed here at the Infirmary. If that is

untrue, please so advise us." Tracerlab, 313 F.2d at 102. QLT

never responded to the letter. In our view, this letter

demonstrates only that MEEI was aware of QLT's business

relationship with CIBA Vision and about the potential for trade

secret misappropriation existing in that relationship. The letter

makes no precise accusations and gives no indication that MEEI was

aware of particular instances of misappropriation.

b. Applying Massachusetts Tolling Law

We have held that "the Massachusetts court does not

equate suspicion with knowledge, but is explicit in requiring

actual knowledge, or, as an equivalent, full means of detecting the

fraud." Id. (internal quotation omitted). The district court

rejected MEEI's reliance on Tracerlab, because it found that the

1992 letter, among other evidence, showed that MEEI actually

believed it had a cause of action for trade secret

misappropriation. The district court believed that plaintiffs

14
The district court also placed weight on the deposition
testimony of MEEI's witness Lisa Petukian that Miller had said that
some of her data had been shared with CIBA Vision. However, from
this testimony, we do not know whether Miller knew anything about
the scope of the misappropriations or whether they were more than
isolated events.

-47-
clearly had more knowledge of QLT's misappropriations than the

plaintiffs had in Tracerlab, where the court found that the

plaintiff's belief was based on "gossamer threads of speculation,

suspicion and surmise." Id. at 100.

However, we find Tracerlab instructive. As in this case,

the plaintiffs in Tracerlab knew that the defendants possessed the

trade secrets in question. Id. at 99 ("There is no question but

that [the plaintiff] was aware from the beginning that [the

defendants] knew plaintiff's trade secrets" because they were

former employees of the plaintiff.) Furthermore, in Tracerlab, the

court found that the plaintiff was "well aware from the very outset

that [the defendants] had gone into the [same] field and were

producing a competitive product." Id. at 100. Still, in that

case, we found that "all of this is a far different thing from

having knowledge that the defendant had misappropriated and was

using the self-same . . . trade secrets . . . underl[ying] the

present cause of action." Id. Moreover, unlike most trade secret

cases, during much of the time in question in this case, use of

MEEI's trade secrets by data recipients like CIBA Vision would

still have remained behind closed doors, as product development was

not yet complete. Therefore, MEEI was even less likely to become

aware of any unauthorized disclosures.

"Although the Massachusetts legislature has set statutory

limitations periods for various causes of action[,] . . .

-48-
determining when claims accrue 'has long been the product of

judicial interpretation.'" Cambridge Plating Co., 991 F.2d at 25

(quoting Franklin v. Albert, 411 N.E.2d 458 (Mass. 1980)).

"Massachusetts courts have recognized that it would be unfair to

begin running the statute of limitations before a plaintiff is put

on notice that she has a claim." Id. (citing Bowen v. Eli Lilly &

Co., 557 N.E.2d 739 (Mass. 1990)).

Although it is true that "[t]he plaintiff need not know

the full extent of the injury before the statute starts to run,"

Bowen, 557 N.E.2d at 741 (emphasis added), the district court

incorrectly expanded this principle to find that MEEI need not know

"the full extent of its claim." Mass. Eye & Ear Infirmary v. QLT

Phototherapeutics, Inc., No. 00-10783, at 12 (D. Mass. Apr. 23,

2002) (sealed memorandum in support of summary judgment). This is

not a case in which MEEI claims only that it did not know how much

it had been harmed; rather, MEEI claims that it did not know that

it had been harmed at all.

c. MEEI's Awareness of Some of QLT's Misappropriations

In order for the statute of limitations to start to run,

"an event or events [must] have occurred that are reasonably likely

to have put the plaintiff on notice that he has been harmed."

Stark, 736 N.E.2d at 442 (citing Bowen, 557 N.E.2d at 741). We do

not believe that in a complex case of this nature -- where trade

secrets of varying importance are alleged to have been divulged

-49-
over a period of years -- that notice of one misappropriation can

constitute sufficient notice to begin tolling the statute for all

misappropriations. Although we are not prepared to state a general

rule, in a case such as this one, a wronged party should not be

prejudiced with regards to later torts committed against it, simply

because a defendant started the clock running by committing similar

acts at an earlier time. Statutes of limitations provide necessary

closure and fairness for potential defendants. However, a

plaintiff must be able to decide when the harms it has sustained

require bringing suit, and no defendant should be able to immunize

itself from later, potentially graver claims, by openly engaging in

prior, similar offenses that the future plaintiff does not believe

warrant bringing suit.

MEEI has not denied knowledge of some of QLT's alleged

trade secrets misappropriations. The record does not, however,

indicate that MEEI knew of all, or substantially all, such

misappropriations. Furthermore, MEEI's claims are strengthened by

the existence of the Confidentiality Agreement and QLT's repeated

assurances that its trade secrets were not being disclosed. To

assume that MEEI knew the full extent of disclosure to CIBA Vision

would be to assume that MEEI was already aware that it was on the

verge of being cut out of any future profits from the newly

developed photodynamic therapy. Though this may be the case, we do

-50-
not believe that such a factual judgment can be made at the summary

judgment stage.

QLT points out that MEEI does not claim that it gained

any additional knowledge in the years prior to filing suit in 2000,

and thus MEEI could just as easily have filed suit more than three

years prior. However, this fact alone is not sufficient to show

that MEEI should have filed suit earlier. Because of the nature of

the claim, it is possible that some of MEEI's trade secret claims

were only shots in the dark at the time MEEI filed its complaint,

and that MEEI only learned of the facts substantiating some of its

claim after receiving discovery. Although the fact that a

plaintiff files suit is usually strong evidence that he knows the

facts underlying each of his own claims, filing suit does not

prove, in itself, that he has sufficient knowledge to prevent

tolling of the statute of limitations.

d. Fraudulent Concealment or Breach of Fiduciary Duty

Since the district court found that MEEI had actual

knowledge of QLT's alleged misappropriations, it did not need to

reach the question of whether QLT actively concealed its

disclosures of MEEI's trade secrets. Having found that the issue

of MEEI's knowledge of its trade secret claims was not properly

decided on summary judgment, we believe that MEEI's claims based on

fraudulent concealment should also survive summary judgment.

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 Where a "defendant[] 'made representations [he] knew or

should have known would induce the plaintiff to put off bringing

suit and . . . the plaintiff did in fact delay in reliance on the

representations,'" the statute of limitations is tolled. Olsen v.

Bell Tel. Labs., Inc., 445 N.E.2d 609, 612 (Mass. 1983) (quoting

White v. Peabody Constr. Co., 434 N.E.2d 1015, 1023 (Mass. 1982)).

QLT does not dispute that MEEI may have been assured by QLT that

certain trade secrets were not disclosed. Furthermore, considering

the evidence that QLT continued licensing negotiations at least in

part because it feared suit by MEEI, it is reasonable at this

summary judgment stage to assume that QLT's purpose in making

assurances to MEEI could have been to delay a suit that would

include trade secret claims.

In addition, MEEI's claim that QLT owed fiduciary duties

to MEEI has some persuasive force. Fiduciary duties exist "when a

party to a contract expressly repose[s] a trust or confidence in

the other party" or "where the contract or transaction was

intrinsically fiduciary and, therefore, required perfect good

faith." 26 Richard A. Lord, Williston on Contracts, § 69:23 (4th

ed. 2004). By entering into their joint research relationship,

MEEI and QLT each put their valuable trade secrets in the others'

hands, arguably requiring full disclosure of any misappropriation

of those secrets. Furthermore, in Massachusetts, if a defendant

fails to learn of a trade secret violation due to a fiduciary's

-52-
failure to disclose, then plaintiffs do not have a duty to exercise

due diligence. Puritan Med. Ctr., Inc. v. Cashman, 596 N.E.2d

1004, 1010, n.9 (Mass. 1992). "Once fraudulent concealment is

established, the limitations period is tolled until plaintiffs

actually become aware of the operative facts. Mere suspicion of

fraud is insufficient to end the tolling period." Compagnie de

Reassurance d'Ile de France v. New Eng. Reins. Corp., 944 F. Supp.

986, 995 (D. Mass. 1996) (citing Tracerlab, 313 F.2d at 102).

Thus, if QLT owes a duty of disclosure, then QLT will be forced to

prove that MEEI had actual knowledge of all of QLT's alleged

misappropriations in order to prevent tolling of the statute.

e. MEEI's Late Addition of Trade Secret Claims

MEEI provided no credible explanation for its delayed

attempt to amend its complaint, and thus, we cannot say that the

district court abused its discretion in refusing to allow MEEI to

assert additional claims based on QLT's alleged disclosure of the

results of the Preclinical Bolus Study and its visual acuity data.

See, Torres-Ríos v. LPS Labs., Inc., 152 F.3d 11, 16 (1st Cir.

1998); Hayes v. New Eng. Millwork Distribs., 602 F.2d 15, 19 (1st

Cir. 1979).

2. Unfair Trade Practices

The district court held that its "previous rulings on

Contract and Trade Secret Claims," as well as MEEI's other claims,

"indicate there is no basis, on these facts, for a 93A claim."

-53-
Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., No. 00-

10783, at 21 (D. Mass. Sep. 23, 2002) (sealed memorandum in support

of summary judgment). Having remanded the unjust enrichment and

trade secret claims, we also remand MEEI's 93A unfair trade

practices claims, noting that the success of the unfair trade

practices claims is not necessarily dependent on the success of the

unjust enrichment or trade secret claims.

Massachusetts General Law ch. 93A, § 2 provides that

"[u]nfair methods of competition and unfair or deceptive acts or

practices in the conduct of any trade or commerce" are unlawful.

Mass. Gen. Law ch. 93A, § 2. In determining whether a practice

violates Chapter 93A, we look to "(1) whether the practice . . . is

within at least the penumbra of some common-law, statutory, or

other established concept of unfairness; (2) whether it is immoral,

unethical, oppressive, or unscrupulous; [and] (3) whether it causes

substantial injury to consumers (or competitors or other

businessmen)." PMP Assocs., Inc. v. Globe Newspaper Co., 321

N.E.2d 915, 917 (Mass. 1975) (quotations omitted). We believe that

the same allegations underlying MEEI's unjust enrichment claim

could potentially meet these requirements. Moreover, MEEI alleges

that QLT's trade secret misappropriations played an integral part

in cutting MEEI out of its fair share of the ample profit from the

sale of Visudyne. From the record developed thus far, this court

sees no reason why these allegations and possibly others could not

-54-
meet all three of the 93A factors. Under Massachusetts law,

misappropriation of trade secrets alone can constitute a violation

of Chapter 93A. See, e.g., Jillian's Billiard Club of Am., Inc. v.

Beloff Billiards, Inc., 619 N.E.2d 635 (Mass. App. Ct. 1993).

Thus, we remand MEEI's unfair trade practices claim along with its

unjust enrichment and trade secret claims.

IV. Conclusion

For the foregoing reasons, the judgment of the district

court is affirmed in part and reversed and remanded in part.

Affirmed in part and reversed and remanded in part. No

costs.

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