Eli Lilly secures trade secret suit dismissal
Pharma firm beats back digital health company over migraine tracking app / Indiana’s Uniform Trade Secrets Act cited by US judge.
A North Carolina court has dismissed a suit against US pharmaceutical firm Eli Lilly over claims that the pharmaceutical company stole and used confidential information to launch a migraine tracking app.
District Judge Robert Conrad ordered the dismissal yesterday, 26 September, after finding that the complaint—filed by digital health company SensorRx—was preempted by Indiana’s Uniform Trade Secrets Act (IUTSA).
SensorRx offers a management platform for chronic diseases, which includes MigrnX, a migraine tracking and treatment app.
According to SensorRx’s suit, the firm began developing MigrnX in 2015. Eli Lilly was also developing a migraine app called Vega Migraine, and allegedly expressed interest in entering a potential partnership with—and investment in—SensorRx in 2018.
Due diligence
In early January 2019, the parties executed a mutual confidentiality agreement and met to discuss both applications.
Then, according to the complaint, the parties exchanged a term sheet and entered a due diligence period. During this time, SensorRx provided confidential information acquired through the development and implementation of MigrnX.
However, in May 2019, Eli Lilly terminated the due diligence period and told SensorRx it would not be pursuing a partnership. Later that year, Eli Lilly launched Vega Migraine in the Apple App Store.
Soon after, Eli Lilly filed a complaint seeking declaratory judgments related to alleged trade secret misappropriation and breach of contract at the US District Court for the Southern District of Indiana.
The case was transferred to North Carolina in June 2020, after the Indiana court found it was an improper anticipatory filing. The North Carolina court then dismissed it for the same reason.
SensorRx had also filed its own suit in North Carolina, asserting causes of action for unfair and deceptive practices; fraud/fraudulent concealment; fraudulent inducement; and unjust enrichment.
At the same time, the company asked the court for damages and injunctive relief, including removing Vega Migraine from the App Store.
Following discovery in the suit, Eli Lilly filed for summary judgment.
The lex loci test
In yesterday’s order, Conrad concluded that Indiana law would apply to the dispute. The North Carolina Supreme Court has held that its jurisprudence favours the lex loci test in cases involving tort or tort-like claims, so that the law of the state where the last act occurred (giving rise to a party’s injury) governs.
For each of SensorRx’s claims, the court found that Indiana law governed as the last act, indicating that liability took place in Indiana.
“Any utilisation of SensorRx’s confidential information would have occurred in Indiana, as would the receipt of any benefit from the information. Accordingly, Indiana law controls SensorRx’s claim of unjust enrichment,” said Conrad, addressing the claim of unjust enrichment.
After finding that Indiana law applied, Conrad found that the claims of fraud/fraudulent concealment, fraudulent inducement, and unjust enrichment were preempted by the IUTSA.
“Accordingly, whether Eli Lilly used SensorRx’s confidential information without paying for it, as stated in oral argument, or fraudulently misrepresented that the confidential information would not be used to develop its competing application, as alleged in the amended complaint, the factual allegations bring this case squarely under the IUTSA,” said the judge, before dismissing the suit.
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