Delaware Business Litigation Report

Federal Court Denies Injunction In Diversity-Based Exclusive Licensing Matter.

Benitec Australia Ltd. v. Promega Corp., No. Civ. A. 04-889 JJF, 2005 WL 549552 (D.Del. Mar. 8, 2005). The defendant filed a Motion For a Preliminary Injunction seeking to preserve its rights as an exclusive licensee for the duration of the law suit brought by plaintiff against defendant Promega Corporation ("Promega"). The Court denied the injunction. Benitec Australia Ltd. ("Benitec") is an Australian company that developed therapeutics using DNA-directed RNA interference ("ddRNAi") to treat serious diseases. Defendant Promega, a Wisconsin-based entity, developed and marketed biotechnology research products. The plaintiff brought this suit alleging that the defendant had improperly withheld payments due to the plaintiff under a 2003 worldwide licensing agreement, which gave the defendant the right to commercially develop, sell and distribute ddRNAi products. The license also gave the defendant the exclusive right to grant sub-licenses. In its suit against Promega, Benitec alleged that the non-payment of license fees had converted the license to a non-exclusive one. As a result, the change in the defendant's license status caused all sub-licenses issued and payments to be received against them to accrue to the benefit of the plaintiff. To preserve its exclusive license status, the defendant brought the Injunction Motion. The key issue in the case was whether the plaintiff had rightly declared that the license was converted to a non-exclusive one by the non-payment of annual royalty payments. The defendant alleged that while this suit was pending, plaintiff was harming the defendant by issuing product sublicenses. Applying the familiar four-pronged preliminary injunction test, the Court found that Promega had failed to demonstrate that the plaintiff had breached the contract and would therefore not likely succeed on the merits under the relevant license agreement provisions. This was because the contract clearly stated that the defendant could not withhold royalty payments. The Court also found that the defendant could not succeed on this prong because it had not stated a claim for the plaintiff's alleged breach of the implied warranty of good faith and fair dealing. Similarly, the Court found that the defendant's claims of accord and satisfaction and equitable estoppel also failed. The Court examined the "irreparable harm" prong and found that because money interests were at stake, and Promega had not demonstrated any non-economic hardship, the second prong tilted against issuance of the requested injunction. The Court however found that the "balance of hardships" prong tipped in Promega's favor because while the injunction would cause only minimal monetary harm to Benitec, Promega would be severely prejudiced by the continued issuance of sublicenses by Benitec. The harm to the defendant was identified as the loss of market share, revenue and market good will. Finally, the Court found that the fourth prong - the public interest factor - weighed heavily towards the enforcement of the valid private contract between Benitec and Promega. Accordingly, the Court denied Promega's request to enjoin Benitec. Authored by: Raj Srivatsan 302.888.6831 rsrivatsan@morrisjames.com Share