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Trana Discovery, Inc. v. Southern Research Institute

United States District Court, E.D. North Carolina, Western Division

August 27, 2017




         This cause comes before the Court on defendant's motion to strike supplemental affidavit of Dr. Wainburg, motion for summary judgment, motion to exclude expert opinions of Michael Mischke-Reeds, motion to exclude expert opinions of Mark A. Wainberg, Ph.D., and motion to strike declaration of Edward Gallagher. The appropriate responses and replies have been filed and the matters are ripe for ruling. Also pending and ripe for consideration are several motions to seal documents filed by plaintiff and defendant.

         BACKGROUND [1]

          I. Procedural history

         Plaintiff Trana Discovery (Trana) filed this action on December 12, 2013, alleging claims arising out of defendant Southern Research Institute's (SRT) allegedly negligent testing of potential drug therapy compounds using Trana's technology. Trana's amended complaint alleged claims for negligent misrepresentation, constructive fraud, and negligence. On October 27, 2014, the Court[2] dismissed Trana's negligence and constructive fraud claims. Thereafter, Trana moved for leave to file a second amended complaint in order to add factual allegations and a claim for fraud. This motion was allowed by order entered September 29, 2015. SRI has now moved for summary judgment in its favor on all claims.[3]

         II. Factual background[4]

         Trana was formed to create and license assays, which are chemical tests to determine the presence, absence, or quantity of one or more components of a material. Merriam-Webster Unabridged Dictionary, available at (last visited August 25, 2017). As general background, the Court notes that

[p]harmacological research assays may be classified into three general categories. The first are biochemical assays, in which whole cells are broken down and proteins are separated, purified and test substances applied.....The second approach, cellular assays, in contrast, involve the application of test substances to whole cells to determine the cellular response. Finally, pharmacological researchers will employ the use of animal studies and eventually human studies in their development of new pharmacological products.

Bayer AG v. Housey Pharm., Inc., No. CIV. 01-148-SLR, 2003 WL 22953187, at *1 (D. Del. Dec. 4, 2003). Trana developed assays for testing compounds to determine their ability to inhibit the reproduction of pathogens in the human body by disrupting the pathogen's use of tRNA to replicate. The first of these assays that Trana created worked to detect compounds which would inhibit the human immunodeficiency virus' (HIV) interaction with a specific human tRNA protein that the HIV virus uses to replicate itself. Scientists at SRI and Trana later collaborated to create a methodology for high-throughput screening of compounds using Trana's technology; the result of this work was the Trana HIV 201 High-Throughput Screening Assay (HTS Assay). The HTS Assay is a biochemical assay, meaning it does not use living cells, which identifies hit compounds that show inhibition of the HIV virus' ability to bind to a particular region of a tRNA protein. A biological assay, by comparison, is needed to determine if a hit compound identified by Trana's HTS Assay inhibits replication of HIV in a living cell. Trana contends that its HTS Assay technology can identify compounds that could direct developers of pharmaceuticals to a new class of HIV drug.

         Based on research it had conducted using Trana's HTS Assay, SRI was awarded in September 2007 a research contract funded by the National Institute of Allergy and Infectious Diseases (NIAID), a division of the National Institutes of Health (NIH). The NIAID contract provided that SRI was to "develop and conduct biochemical, cell-based, and tissue-based assays to evaluate both the efficacy and toxicity of the drug substances . . ..". [DE 99-1 at SRI022754]. The contract further provided that SRI was to incorporate new technologies and strategies as they become available. Id. at SRI022755. Under the terms of the contract, SRI, working with Trana as the assay sponsor, was responsible for preparing the testing plan, which would be sent to the NIAID project officer for approval before any work on the contract could begin. [DE 99-4 at 10] Miller Interrog. 4. Trana was not a party to the NIAID contract; all funds paid to SRI for work under the NIAID contract were paid by NIAID. [DE 76-2] Peterson[5] Dep. at 108. The contract further prohibited SRI from initiating or conducting studies using contract funds without prior written approval by the project officer. [DE 991 at SRI022757].

         After the award of the NIAED contract, Trana and SRI entered into a "Material Transfer and Research Agreement" wherein SRI was required to promptly and fully disclose the results of its research using Trana's HTS Assay and all rights, title, and interest to all developments, inventions, and know-how relating to the use of Trana's assay were assigned to Trana. SRI conducted screening of compounds pursuant to the NIAED contract with the HTS Assay in a facility in Birmingham, Alabama; compounds which through testing were identified as active in the HTS Assay were then tested in human cells in a laboratory in Frederick, Maryland. The testing performed on hits identified by the HTS Assay would use one of two biological assays: CEM-SS, which are cancer cell biological assays, or peripheral blood mononuclear cell (PBMC) biological assays, which are sourced from human blood cells.

         In 2008, under its contract with NIAID, SRI screened 15, 000 compounds using Trana's HTS Assay and identified 164 compounds as biochemically active. These results were reported in February 2009. In April 2009, Roger Miller, the NIAED program officer assigned to the contract, and Roger Ptak from SRI discussed the next phase of testing on hits identified by the HTS Assay.

Due to the limited contract budget available at this time for this project, Mr. Ptak proposed eliminating the expensive and time-consuming dose range study of 160 compounds and suggested that testing proceed directly to biological testing of 150 compounds in CEM cells....I [Miller] also sent an email to Dr. Yenne [with Trana] requesting his concurrence on the study. He responded by email later that day, stating that he had a discussion with Mr. Ptak on the telephone and was in agreement with the plan.

[DE 99-4 at 11] Miller Interrog. 5.

         In June 2009, SRI reported that after testing 136 hits from the preliminary screening of 15, 000 compounds using Trana's HTS Assay, several of the hits had shown bioactivity against HIV-1 infected cells. SRI further reported, as is relevant to this litigation, that two compounds, Hits 154 and 156, were inactive when tested; these hits would later be discovered to exhibit antiviral activity and Trana has referred to these as false negative results. SRI performed the screening reported in June 2009 using CEM-SS cell lines.

         In light of the identification of apparently bioactive compounds in the 15, 000 compound screen, SRI sought and received option funding under the NIAID contract to screen an additional 300, 000 compounds. In August 2009, Trana and SRI executed a Technology/Materials Transfer Agreement assigning intellectual property rights related to the compounds screened under the NIAID contract to Trana. SRI was to provide all information generated from the testing to Trana as well as NIAID and Trana was permitted two years to apply for patents on any identified hit compounds after all screening and confirmatory testing was completed; the time limitation served as a reservation of rights to the government to follow up on promising leads that Trana elected not to pursue as in the public interest. [DE 99-2]; [DE 105-3]. This kind of agreement was unique between NIAID and an assay provider and it further applied retroactively to compounds tested in the 15, 000 screen.

         In January 2010, SRI screened 100, 000 compounds using Trana's HTS Assay. In June 2010, SRI reported results from CEM-SS assays performed on compounds identified as bioactive in the January screening. The June 2010 data report identified Hits 46 and 182 as exhibiting antiviral activity. Trana applied for patents on Hits 46 and 182, but has let those patents lapse due to its later discovery that Hits 46 and 182 were false positive results. The results reported in June 2010 were based on testing performed by SRI research technician Melanie Cokonis.

         Trana alleges that up until June 25, 2012, SRI continued to assure Trana that the June 2010 data was accurate, and that on June 29, 2012, Trana received information from SRI that SRI had discovered a "thumb drive" containing bioactivity data. As a result of this discovery, SRI would repeat the bioactivity study which had been included in the June 2010 data report. SRI reported the results of retesting on August 24, 2012, including that Hits 46 and 182 were not bioactive. [DE 105-9]. The Office of Research Integrity at NIH later entered findings of research misconduct as to Ms. Cokonis specifically related to falsifying assay data submitted to NIH, including data which improperly identified Hits 46 and 182 as bioactive. [DE 102-2].[6]

         A. CEM cell lines and PBMC cell lines

         CEM-SS assays are cancer cell based assays which use laboratory-adapted strains of a virus for testing. [DE 99-9] Peterson Dep. at 88; [DE 99-10] Buckheit Dep. at 109. PBMC assays are obtained from human donor blood and can be infected with clinical strains of a virus. [DE 99-10] Buckheit Dep. at 26. CEM cell screening is rapid and inexpensive, while, because the cells are from live human donors, PBMC cells present cost and variability hurdles which must be overcome prior to their use in a high-throughput screen. Id. at 108-09. Differences in activity between CEM and PBMC results can be substantial because CEM cells are tumor cells, which by design are highly-activated and will robustly replicate HIV. Id. at 109. Thus, "a compound has to be really good in order to inhibit replication in CEM cells; whereas if you move into PBMCs, -a lesser active compound may look even better." Id. at 110. According to Dr. ...

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