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ABS Global, Inc. v. Inguran, LLC

United States District Court, W.D. Wisconsin

July 21, 2016

ABS GLOBAL, INC., Plaintiff/Counterclaim Defendant,
v.
INGURAN, LLC, Defendant/Counterclaimant/Third-Party Plaintiff, and XY, LLC, Intervening Defendant/Counterclaimant/Third-Party Plaintiff, and CYTONOME/ST., LLC, Intervening Defendant,
v.
GENUS PLC, Third-Party Defendant.

          OPINION & ORDER

          WILLIAM M. CONLEY, DISTRICT JUDGE

         This lawsuit arises out of the breakdown of a now ten-year business relationship between plaintiff ABS Global, Inc. (“ABS”) and defendant/counterclaimant Inguran, LLC d/b/a Sexing Technologies (“ST”). Originally, ABS sued seeking a declaration that the parties’ latest agreement, under which ST is to continue to provide sexed semen processing services for prized bulls at ABS facilities from 2012 to at least 2017, is void under § 2 of the Sherman Antitrust Act and Wisconsin unfair competition law. Not to be outdone, ST then counterclaimed that: (1) ABS and ABS’s parent company, Genus plc (“Genus”), had fraudulently induced ST to enter into the Agreement; (2) ABS and Genus breached the agreement in a number of ways; (3) ABS and Genus are liable under an alternative theory of promissory estoppel; and (4) ABS and Genus has infringed two U.S. patents owned by ST. Finally, ST’s wholly-owned subsidiary, XY, LLC (“XY”), intervened in this action with its own claims against ABS and Genus for infringement of two additional U.S. patents owned by XY, and for misappropriation of XY’s alleged trade secrets. Sadly for all concerned, most of these claims will now proceed to a jury trial for the reasons set forth below.

         OVERVIEW OF UNDISPUTED FACTS[1]

         I. The Parties

         ABS is in the business of providing bull semen to dairy and beef producers for artificial insemination. ST provides a service to ABS and other similar companies using “sorting” technology to separate male and female bull sperm. From 2006 to 2012, ABS and ST did business together under the terms of several contracts called “Sorting Agreements.” In 2012, ABS explored alternatives to doing business with ST, including use of its own technology for sorting, but was unsuccessful. As a result, ABS reupped, signing a 2012 Semen Sorting Agreement with ST (the “Agreement”) after some six months of negotiation over its specific terms. Also in 2012, ABS continued researching and developing technology for processing sexed bovine semen, which it calls “Genus Sexed Semen” or “GSS” technology.

         II. Background

         Although the parties’ characterizations of the bull semen market differ drastically, they do not appear to dispute the following facts that provide necessary context to their claims and defenses.[2] Dairy and beef producers often use artificial insemination to impregnate cows with semen from a high quality bull. The suppliers of bull semen like ABS are referred to as “bull studs.” Along with ABS, who appears to be the industry leader, just three other major bull studs -- Select Sires, Cooperative Resources International (“CRI”) and Accelerated Genetics -- represent some 96% of the U.S. market for bull studs.

         Although ST also operates as a bull stud, it is mainly in the business of sorting bull ejaculate so that the viable sperm cells are either predominantly female or male. The parties, and apparently the marketplace, refer to the final product of this process as “sexed semen” or “sexed bovine semen.”

         On dairy farms, female calves are generally more valuable than male calves. Inseminating cows with sexed semen that has a higher proportion of X-chromosome sperm is more likely to lead to birth of a female calf than impregnating them with so-called “conventional” semen that is not sexed. As a result, sexed semen has become a tool for many (although not all) dairy producers using artificial insemination, especially for heifers, who tend to be more fertile and therefore more likely to be impregnated by the substantially more expensive, though generally less potent sexed semen.[3]Accordingly, even though the majority of its sales are comprised of conventional semen, companies like ABS and the three other major American bull studs, offer both conventional bovine semen and sexed semen.

         ST was founded in October of 2002, and it began attempting to commercialize sexed semen processing in 2003. ST entered into its first contract with a U.S. bull stud to provide sexed semen processing services in 2004. By virtue of its patented method and related advantages it has received from acquiring XY, Inc. (as described below), ST currently has nearly 100 percent of the sales of sexed semen processing services in the United States. ABS asserts (and ST disputes) that bull studs like ABS have had no choice but to work with and accept ST’s contract terms, including those in the Agreement at issue here. In particular, ABS and ST dispute whether ABS needed, or had the ability to find, another source for sexed semen processing.

         III. The Agreement

         The Agreement became effective September 1, 2012, and continues by its terms until at least September 1, 2017, with the opportunity for additional one-year extensions. In it, ABS agreed to provide raw ejaculate from bulls owned or leased by ABS for sorting by ST. The agreement is governed by Texas law and contains the following preamble:

ST is engaged in the business of sorting and freezing bovine semen into X (female) chromosome bearing and Y (male) chromosome bearing populations, for use in the artificial insemination of cattle (herein the processing service shall be known as “Sort Semen” or “Sorting Semen” and resultant X or Y chromosome bearing populations of sperm shall be known as “Sorted Semen”). ABS wishes to engage ST as a service provider to Sort Semen from its bulls in strict compliance with Certified Semen Services’ processes and procedures (known as “CSS Compliance”) and retain the X (female) and Y (male) chromosome bearing population, respectively, as separated (known as “Cells”).

(Agreement, Ex. 7 to Horowitz decl., dkt. #258-7.)

         The parties’ contractual and antitrust/unfair competition-related disputes stem from several sections of this agreement, principally involving:

Section 2, which includes annual commitments for ABS and ST. Each year, ABS must provide a certain annual amount of semen and ST must provide its services for a certain amount of semen.
Section 3, which includes a provision that makes the contract extend for an additional year “unless either party … gives written notice to the other party of its election not to so extend the term” three years in advance. (Agreement, dkt. #258-7, at ING005740.)
Section 4(a), which provides for liquidated damages if either party terminates the Agreement for any reason other than the other party’s material breach, as defined by Section 19 of the Agreement. Section 4(b) provides that ABS will pay ST $1, 500, 000 “as liquidated damages” if ABS terminates the agreement, including by non-renewal under Section 3, or if ST terminates it due to ABS’s material breach.
Section 16, which defines “ST’s Confidential Information” and ABS agreed not to use, disclose or make such information available to any third party.
Section 18(a), which restricts ABS’s ability to research and develop a sorting technology that would compete with ST’s technology. Section 18(b) permits ABS to continue research and development on programs that were in place at least ninety (90) days prior to the Agreement’s effective date.

         IV. The Technology

         A. ST Sexed Semen Processing

         ST originally based its sexed semen technology on a process developed by Lawrence Johnson at the U.S. Department of Agriculture (the “Johnson method”). The Johnson method is the subject of U.S. Patent No. 5, 135, 759 (“Johnson Patent”) and requires a device called a flow cytometer, which is used to separate cells physically based on their different properties. The Johnson Patent involves the use of fluorescent dye that binds to the DNA in sperm cells. Because X chromosomes, which are female, have more DNA than Y chromosomes, which are male, an X-carrying/female sperm will give off more fluorescent light when exposed to a detection laser than a Y-carrying/male sperm. The Johnson method uses this difference in fluorescence to sort female from male sperm by applying a positive, negative or no charge to a droplet containing an individual cell and then deflecting the charged droplet one way or another with electrostatic deflection plates.

         Since the Johnson Patent expired in 2006, ST has purchased, acquired or licensed several U.S. patents related to sexed semen processing. Principally, ST acquired control of XY, Inc., in 2007. At the time, ST was one of several U.S. licensees using XY’s U.S. Patent Nos. 7, 195, 920 (“’920 patent”) and 7, 820, 425 (“’425 patent”). The parties dispute exactly how the other licenses ended, but they do not dispute that ST is now XY’s sole current licensee for its patented sexed semen process in the United States for bull studs. Since 2007, XY has also been a wholly-owned subsidiary of ST. In 2008, ST also purchased several pending patent applications related to sexed semen processing from Monsanto Company (“Monsanto”). Those applications matured into 24 U.S. patents, including U.S. Patent Nos. 8, 206, 987 (“’987 patent”) and 8, 198, 092 (“’092 patent”) that remain in suit here. Finally, ST obtained an exclusive license for non-human applications to a portfolio of U.S. patents relating to sexed semen processing from Cytonome, Inc., covering an additional 46 U.S. patents related to sexed semen.

         B. ABS Sexed Semen Processing

         ABS has developed its own technology, known as the “GSS technology” for “Genus Sexed Semen, ” that uses a laser-based method for producing sexed semen. The GSS technology kills or incapacitates the male or female sperm, rather than separating sperm by sex. Through this technology, all of the sperm remain in a single stream throughout the process and are collected in a single container after the laser operates on them. ABS’s corporate representative indicates that the GSS technology has worked in field trials and is ready to launch, but ABS has put off the launch due to this lawsuit.

         OPINION

         I. Contract Claims

         The parties’ Agreement includes a Texas choice of law provision, and so Texas law controls. (Duncan Decl. Ex. 1 (dkt. #245-1) [hereinafter “Agreement”] ¶ 27.) Under Texas law, “[t]he construction of an unambiguous contract is a question of law for the court.” Willis v. Donnelly, 199 S.W.3d 262, 275 (Tex. 2006) (citing MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999)). “In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument.” Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). This effort requires the court to “examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.” Id. (emphasis in original) (citing Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (1951)).

         “If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.” Id. If, however, “by looking at the contract as a whole in light of the circumstances present when the contract was entered, ” a contract is “reasonably susceptible to more than one meaning, ” then it is ambiguous. Id. at 393-94. In the event that a contract is ambiguous, “interpretation of the instrument becomes a fact issue.” Id. at 394.

         With respect to the Agreement itself, ABS moves for summary judgment on four grounds: (1) its development and expected commercialization of the GSS technology does not breach the Agreement; (2) ST’s fraudulent inducement and promissory estoppel claims fail as a matter of law; (3) ABS did not breach the confidentiality provisions of the Agreement; and (4) the liquidated damages provision of the Agreement is unenforceable. In response, ST moves for summary judgment on the basis that: (1) the non-compete clause of the Agreement expressly encompasses the GSS technology; and (2) the Agreement’s covenant not to compete is enforceable under Texas law.

         A. Research and Development of the GSS Technology

         Since both ABS and ST move for summary judgment on the question of whether the GSS technology violates the Agreement’s non-compete clause, the court begins there. The clause provides:

To further ensure the efficient and full utilization of ST’s sorting capacity and to ensure the protection of ST’s Confidential Information, neither ABS nor any of its Affiliates shall, at any time during the Term of this Agreement (including any Renewal Years), directly or indirectly (whether by means of financing or investing in another entity or its activities), create, develop, sell or market any method, apparatus, or technology for sorting mammalian semen into X (female) chromosome bearing and Y (male) chromosome bearing sperm populations, where such method, apparatus or technology is, or is intended to be, directly competitive with (i) ST’s technology for Sorting Semen, or (ii) any sorted semen produced by ST’s technology for Sorting Semen. For the avoidance of any doubt, in the event of termination of this Agreement prior to the expiration of the Term, excluding termination by ABS due to ST’s material breach, the obligations under this Section 18 shall survive until the end of the Term (including any Renewal Years then accrued).

(Agreement ¶ 18(a) (emphasis added).)

         In an argument that echoes in the parties’ patent disputes, ABS argues primarily that Section 18(a) does not apply because the GSS technology “kills undesired cells but does not separate them from the desired cells, is not a technology for ‘sorting mammalian semen into X (female) chromosome bearing and Y (male) chromosome bearing sperm populations, ’ and therefore ST cannot establish any breach of Section 18(a).” (Pl.’s Opening Br. (dkt. #270) at 58.) Even more specifically, ABS argues, “a processing technology that collects the processed semen in a single container does not ‘sort’ into two ‘populations’ and is therefore not affected by the provision’s restrictions on sorting technologies.” (Id.)

         In support of its reading of “sorting” under Section 18(a), ABS refers to three other provisions in the Agreement. Two are found in its “prelude”: (1) “ST is engaged in the business of sorting and freezing bovine semen into X (female) chromosome bearing and Y (male) chromosome bearing populations” (Agreement (dkt. #245-1) at 1 (emphasis added)); and (2) “ABS wishes to engage ST as a service provider to Sort Semen . . . and retain the X (female) and Y (male) chromosome bearing population, respectively, as separated[.]” (Id.) The third provision concerns the Agreement’s definition of “purity, ” which is “the ratio of the number of sperm cells of the requested gender to the total number of sperm cells in each straw.” (Id. at ¶ 1.) ABS also cites the Oxford English Dictionary, which defines “sort” as “to separate and put into different sorts or classes, ” as well as the American Heritage Dictionary, which defines “sort” as “to separate from others, ” and provides for the example that of sorting “the wheat from the chaff.”

         On the other hand, ST argues that “[w]hen viewed in light of the entire agreement, ‘sorting’ covers any and all techniques, including droplet sorting, photo-damage sorting, fluid-switching sorting, or similar techniques.” (Def.’s Opening Br. (dkt. #275) at 30.) ST further argues that in addition to the preamble of the agreement not limiting sorting to a process that “separates” or “divides, ” it also merely concerns the extent of processing services ST was agreeing to provide, and not which activities Section 18 barred. Moreover, ST points to the second half of one of the preamble sentences that states “the purpose of the sorting is to create sperm populations ‘for use in the artificial insemination of cattle.’” (Id. at 29.)

         Taking the contract as a whole, the court is persuaded that ABS’s interpretation of “sorting” in Section 18(a) is too limited to give effect to the intentions of the parties. Beginning with the plain language of the Agreement, even under the dictionary definitions provided by ABS, the verb “sort” concerns the process by which one “separates” or “puts into different classes, ” not the form of the resulting thing or things that were sorted. By way of example only, ABS’s extremely narrow reading of “sorting” would exclude a gym teacher who separates a group of elementary school students into two soccer teams by handing half of them the same color jersey, but not physically separating them into two distinct groups. Nevertheless, few would disagree that the teacher had “sorted” his students under a plain or ordinary understanding of the word. Thus, while the meaning of “sorting” certainly extends to circumstances where one separates a population into smaller, separate populations -- and indeed, if that is the narrow method called for by a patent’s express terms, might even require it -- but one can sort something, such as children into two teams, library books into genres or sperm cells into a population comprising sperm cells of a single sex, without ever physically separating them.

         The context of the Agreement as a whole confirms that the parties intended a broader meaning than that now championed by ABS. First, the language of the non-compete clause is broad, restricting ABS from doing anything to “directly or indirectly . . . create, develop, sell or market any method, apparatus, or technology for sorting mammalian semen[.]” (Agreement ¶ 18(a).) Second, the non-compete clause restricts devices that sort semen into “X (female) chromosome bearing and Y (male) chromosome bearing sperm populations, ” which again by its plain language is not limited to physical separation of sperm into two separate containers, provided the ultimate product creates an acceptably pure female or male chromosome bearing sperm population. Third, and perhaps most important, the non-compete clause itself explains that the purpose of the clause is to restrict a “method, apparatus or technology [that] is, or is intended to be, directly competitive with (i) ST’s technology for Sorting Semen; or (ii) any sorted semen produced by ST’s technology for Sorting Semen, ” at least one of which there is no dispute does not in fact “sort” using physical separation. Accordingly, the non-compete clause demonstrates that the primary purpose for the clause is to limit direct competition with either the particular technology utilized by ST or the product created with that technology, and not just a specific method for sorting semen by sex.

         Since ABS’s express desire to compete with ST is at the heart of the current lawsuit, ABS does not contend, nor could it contend, that its GSS technology is not designed to compete directly with ST’s technology. Indeed, ABS brings antitrust claims against ST based on that very theory. For all of these reasons, ST’s assertion that “sorting” in Section 18 encompasses ABS’s GSS technology, better captures the context of the Agreement as a whole, and gives effect to the plain language of the non-compete clause in particular, whereas ABS’s interpretation would render that clause relatively meaningless.

         That said, however, the Agreement also includes a “safe harbor” provision that was the subject of much negotiation:

Notwithstanding Section 18(a) above or any other provision of this Agreement, nothing herein shall operate to restrict ABS or its affiliates from fulfilling or continuing their research and development program that has been in place at least ninety (90) days prior to the Effective Date of this Agreement (as demonstrated by ABS’s or its Affiliates’ contemporaneous written records), including the utilization of ABS’ own personnel and resources and any third party for research or development of semen sorting technology or for investment in such research or development in fulfillment of that program; provided, however, that the aforesaid research and development program shall not include any marketing or sales of Sorted Semen or any use of Sorted Semen in third-party animals. For purposes of the foregoing sentence, “field trials” shall be limited as follows: (1) “field trials” shall be conducted with no more than 12, 000 cumulative doses per annum and no more than 75 of ABS’s co-operator herds in any year, (ii) “field trials” cannot include the use of conventional or Sorted Semen produced by or under the authority of ST or its Affiliates, whether as a control or otherwise, and (iii) an animal leased to ABS or any of its Affiliates shall be considered a third-party animal.

(Id. at ¶ 18(b).)

         ST does not effectively dispute that the safe harbor in Section 18(b) exempts ABS’s research and development of the GSS technology from any restrictions found in Section 18(a), although it accuses ABS of fraud in not disclosing the scope or progress in that technology during negotiations, a claim addressed below. While the safe harbor does not extend to any efforts by ABS to sell or market competing technologies, there is also no dispute that ABS is currently doing neither. As a result, the parties’ current contract dispute comes down to ABS’s claim for a declaratory judgment that it may compete with ST in the sexed bovine sperm market using its own GSS technology despite an express contractual prohibition to its doing so.

         B. Enforceability of Non-Compete Under Texas Law

         ST also moves for summary judgment on the basis that its non-compete clause is enforceable under Texas law, which ABS disputes. Under Texas law, “[a] covenant is unreasonable if it is greater than required for the protection of the person whose benefit the restraint is imposed or imposes undue hardship upon the person restricted.” Republic Servs., Inc. v. Rodriguez, No. 14-12-01054-CV, 2014 WL 2936172, at *7 (Tex. App. 2014) (citation omitted). “Industrywide exclusions are therefore unreasonable” under Texas law. Id. An enforceable covenant not to compete must also be “ancillary to or part of an otherwise enforceable agreement” and reasonably limited in scope as to time and geography. Tex. Bus. & Com. Code § 15.50(a).

         Here, ABS has a strong argument that the scope of the activity covered by Section 18(a) is too broad. First, ABS argues that to the extent Section 18 restricts ABS from "directly or indirectly" researching or marketing technology that would compete with ST's technology, it is arguable that Section 18 amounts to an unenforceable "industrywide exclusion" under Texas law. In response, defendants argue that the non-compete clause cannot be industrywide because it leaves ABS able to pursue any activities it wishes with respect to the research, development or commercialization of conventional bull semen processes. Since the Agreement concerns only sexed bull semen, it is unclear why the lack of any restrictions on conventional bull semen should save Section 18. Second, plaintiffs point out that Section 18's worldwide restriction on ABS’s activity is unreasonably large in scope, particularly given that ABS's only focus in foreign markets has been on sales of conventional bull semen. Cf. Cobb v. Caye Publ'g Grp. Inc., 322 S.W.3d 780, 786 (Tex. App. 2010) (holding that a covenant not to compete extending to a particular county was unreasonable in scope when the defendant “had nothing more than a potential business interest” in that county) (emphasis in original).

         However, Texas law also enables courts to reform covenants not to compete “[i]f the covenant is found to be ancillary to or part of an otherwise enforceable agreement but contains limitations as to time, geographical area, or scope of activity to be restrained that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the promissee[.]” Tex. Bus. & Com. Code § 15.51. Until ST establishes a breach of the non-compete clause, however, the court will not reform it. Accordingly, the court will deny summary judgment to defendants on the issue of whether Section 18 is an enforceable covenant not to compete.

         C. Confidential Information

         Next, ABS seeks summary judgment on ST’s claim that it breached the confidentiality provisions in the Agreement. Section 16 of the Agreement defines “ST’s Confidential Information” as that which is “confidential, non-public, proprietary and/or generally not known to the public[.]” (Agreement ¶ 16.) The allegedly confidential information ST claims ABS misused includes “(1) ST’s and XY’s sexing protocols for preparing semen sorting media; (2) ST’s method for calculating straw fill volumes; and (3) ST’s quality control data for sexed bulls.”[4] (Defs.’ Opp’n Br. (dkt. #334) at 63.) In moving for summary judgment, ABS asserts with respect to the first category that there is no evidence any sexing protocols were even disclosed to ABS. As for the second and third, ABS asserts that: ST’s method for calculating straw fill volumes is not confidential; and the quality control data did not belong to ST. The court addresses each assertion in turn.

         Starting with the first category, ABS concedes that XY’s tort claim based on allegations that an ex-employee, Kathy Mean, stole sexing protocols to benefit the GSS technology must go to trial. ABS argues with respect to the breach of the confidentiality provision claims, however, that since Mean left XY to work at ABS in 2007, ST has failed to show that ABS used confidential information regarding the protocols disclosed during the life of the Agreement, which became effective in 2012.

         In addition to Mean’s claimed disclosures, ST points to evidence that it claims demonstrates ABS’s receipt of media protocols. Generally, ST asserts that ABS employees had “unfettered access” to its laboratory in ABS’s facility where ST kept its protocols in notebooks. Furthermore, ABS employee Eliza Roberts testified at her deposition that “confidential information about ST’s sperm-sorting process was conveyed to [ABS employee] Jeff Betthauser when the ST lab was set up.” Finally, ST employee Rich Neis testified at his deposition that he had multiple conversations with Roberts about adjusting the pH range of the ejaculate to better stain the sperm cells. In light of this varied testimony, ST has provided sufficient evidence that ABS received sexing protocols during the life of the Agreement. Accordingly, ABS is not entitled to summary judgment on ST’s claim for breach of contract with respect to ABS’s alleged misuse for competitive advantage of confidential sexing protocols for preparing sorting media.

         Likewise, ABS is not entitled to summary judgment on the third category, given that the court is unable to resolve the parties’ conflicting evidence as to whether: (1) quality control data was owned by ABS or (2) any use of the quality control data by ABS could not have provided a competitive advantage. That being said, the court agrees with ABS that it is entitled to partial summary judgment as to the second category, since ST has failed to produce any evidence that so-called confidential information regarding its method for calculating straw fill volumes was not already disclosed in an earlier instruction manual or ABS memo on the subject. Accordingly, the court will grant in part and deny in part summary judgment as to ST’s claims for breach of the Agreement’s confidentiality provision.

         D. Liquidated Damages

         ABS moves for summary judgment on the grounds that the Agreement’s liquidated damages provision is unenforceable. While this is a question of law for the court, Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1992), the party challenging the validity of a liquidated damages provision has the burden of proof. Nortex Drug Distribs., Inc. v. Sunset Trails, Inc., 2000 WL 1230766, at *3 (Tex. App. Aug. 31, 2000).

         Section 4 of the Agreement provides for several different, overlapping measures of “liquidated damages” recoverable by ST. In Section 4(a), the Agreement provides that ABS will pay ST $7.50 per unpurchased straw for all unfilled “Annual Minimum Commitments” as “actual economic damages” should ABS commit a material breach or terminate the Agreement for any reason other than ST’s material breach. (Agreement ¶ 4(a).) In Section 4(a), the Agreement also provides that ABS will pay ST $1, 500, 000 “for additional [unspecified but] actual economic damages” upon the early termination of the Agreement, ST terminates the contract due to ABS’s material breach or (apparently) ABS merely gives timely notice of the Agreement’s non-renewal under Section 3. (Id. at ¶ 4(b).)

         Section 3 of the Agreement, an “evergreen” provision, explains that the term of the Agreement will automatically be extended for additional one-year intervals unless and until either party provides written notice no later than three years before its then effective end date. (Id. at ¶ 3.) Effectively then, the original 5-year term of the Agreement will be extended for one additional year on the anniversary of the second year of the Agreement until either party gives timely notice that it no longer wishes to extend further. (Id.)

         Finally, Section 4(c) states:

The parties agree that the sums set forth in Sections 4(a) and 4(b) above are a reasonable estimate of the damages that would be suffered by ST due solely to the lost sales of Sorted Semen as a result of the termination scenarios set forth in Sections 4(a) and 4(b), as the case may be, and that such sums are not intended to be a penalty. These liquidated damages shall not be exclusive of each other, nor of any other remedy available to ST at law or in equity, including but not limited to termination of this Agreement, or of the recovery of any damages caused by any other breach of this Agreement by ABS.

(Agreement ¶ 4(c).)

         Defendants ST and XY argue primarily that, by its terms, the $1.5 million fee set forth in Section 4(b) is not a liquidated damages provision or unenforceable penalty at all, but rather a bargained-for “cancellation fee.” There is at least some support in the case law for the proposition that a provision can only be invalidated as an unenforceable liquidated damages provision under Texas law if it is triggered as the result of a breach. See Blanchard & Co., Inc. v. Heritage Capital Corp., No. Civ. A. 3: 97-CV-0690-H, 1998 WL 597160, at *3-4 (N.D. Tex. Aug. 26, 1998) (holding that a provision was “neither a penalty nor a liquidated damages provision” because the condition triggering the provision did not result in a breach of contract); B.F. Saul Real Estate Inv. Tr. v. McGovern, 683 S.W.2d 531, 534 (Tex. App. 1984) (“The whole subject of penalty versus liquidated damages only arises when the parties to a contract have attempted to provide for a remedial right upon a breach of contract.”). Indeed, at least one Texas court has concluded that a “cancellation damages provision” was not an unenforceable liquidated damages penalty under Texas law. See Nortex Drug Distribs., 2000 WL 1230766 at *3 (finding). But see Garza v. Dealers Elec. Supply, No. 14-02-01227-CV, 2004 WL 1193698, at *1 n.6 (Tex. App. 2004) (“A party has no right to have a contract term enforced that violates the rule limiting compensation to the damages actually sustained. Phillips, 820 S.W.2d at 788. Thus, even if a liquidated damage term in the form of a 100% cancellation fee had been expressly agreed to . . ., it would have required proof that the actual damage amount was difficult to ascertain and that the liquidated damage amount was a reasonable forecast of just compensation, neither of which was shown in this case.”).

         In an attempt to make sense of this somewhat muddled standard, defendants argue that case law requires Texas courts to look to “the substance of the contract’s terms to determine if the provision constitutes ‘liquidated damages, ’” meaning that it is not dispositive that Section 4(a) of the Agreement refers to the $1.5 million figure as “liquidated damages.” Sunbelt Servs., Inc. v. Grove Temp. Serv., Inc., No. 05-05-01090-CV, 2006 WL 2130144, at *3 (Tex. App. Aug. 1, 2006). They further assert that “ABS and Genus only challenge the $1.5 million payment in the context of Section 4(b)(i), ” and therefore, “Section 4(b)(ii) is not at issue.” While ABS and Genus’s briefing lacks some clarity with respect to their arguments as to the enforceability of Section 4 of the agreement, however, the fairest reading of their motion is that they intend to challenge the enforceability of Section 4 more broadly.[5]

         Ultimately, the court is not persuaded that the $1.5 million fee is merely “compensation for the cost of setting up [ST’s] sorting lab onsite at ABS’s Wisconsin facility” (Def.’s Opp’n Br. (dkt. #334) at 78), which after all would not seem all that difficult to ascertain in actual dollars. Although it is arguable that this fee operates as a cancellation fee for breach under Section 4(b)(i), it clearly is a liquidated damages fee under 4(b)(ii). Accordingly, even under the Texas cases requiring that a breach of contract trigger the fee before invalidating it as an unenforceable liquidated damages provision, the $1.5 million fee is a liquidated damages provision.

         For a liquidated damages provision to be enforceable under Texas law, the relevant harm caused by the breach must also be “incapable or difficult of estimation” and the amount of liquidated damages must be “a reasonable forecast of just compensation.” FPL Energy, LLC v. TXU Portfolio Mgmt. Co., L.P., 426 S.W.3d 59, 69 (Tex. 2014) (citations omitted). Defendants do not respond to ABS’s arguments that the liquidated damages available under Section 4 fail to meet these criteria, relying instead on their original arguments that: (1) the $1.5 million figure in Section 4(b)(i) is merely a “cancellation fee”; and (2) plaintiffs do not challenge the enforceability of Section 4(b)(ii). Having rejected both arguments, the court further agrees with ABS that the flat $1.5 million fee cannot be a reasonable forecast of just compensation, since it applies equally in the first year of the agreement as it does to the last. See Bethel v. Butler Drilling Co., 635 S.W.2d 834, 837-38 (Tex. App. 1982) (finding that a liquidated damages provision was an unenforceable penalty because it did not account for the proportionality of the harm caused by the breach). This conclusion is bolstered by the statement in Section 4(c) of the Agreement that “the sums set forth in Sections 4(a) and 4(b) above are a reasonable estimate of the damages that would be suffered by ST due solely to the lost sales of Sorted Semen[.]” (Agreement ¶ 4(c).)

         ST and XY also fail to respond to ABS and Genus’s argument that Section 4(c) renders the liquidated damages provision unenforceable because it explicitly states that “[t]hese liquidated damages shall not be exclusive of each other, nor of any other remedy available to ST at law or in equity, ” violating Texas law prohibiting liquidated damages provisions allowing for such cumulative remedies. See Nextar Broadcasting, Inc. v. Gray, No. 09-07-364 CV, 2008 WL 2521967, at *3 (Tex. App. June 26, 2008) (“Generally, a contractual provision that does not exclude further liability for actual damages is not a reasonable forecast of just compensation and is an unenforceable penalty.”) The court, therefore, will dismiss ST’s claim for damages under the liquidated damages provision in Section 4(b) of the Agreement.

         E. Fraudulent Inducement

         Alternatively, ST claims that plaintiffs made two material misrepresentations that fraudulently induced it to enter the Agreement: (1) ABS and Genus told ST that they wanted a long-term contract despite never actually intending to perform the agreed-upon, five-year period called for under the Agreement (Answer (dkt. #302) ¶¶ 208-209); and (2) ABS and Genus only partially disclosed the nature of the GSS technology, concealing their belief that it was not subject to the non-compete provision. (Id. at ¶¶ 211-14.)

         Under Texas law, a plaintiff proves fraudulent inducement by showing “a material misrepresentation[, ] . . . known to be false when made or was made recklessly as a positive assertion without knowledge of its truth[, ] which was intended to be acted upon[, ] . . . was relied upon[, ] and . . . caused injury.” Fletcher v. Edwards, 26 S.W.3d 66, 77 (Tex. App. 2000) (citing Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998)). To prove that a representation involving a promise to do something in the future was false, a plaintiff must show that the party who made the promise “had no intention of performing the act” at the time the promise was made. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 222 (Tex. 1992).

         Even assuming a stated intention to perform a long-term contract could serve as an actionable misrepresentation, ST cannot show that ABS had no intention to perform at the time it made that “promise.”[6] As an initial matter, the parties agree that ABS has continued performing its end of the bargain throughout this litigation, even after giving timely notice of its desire to non-renew undermining any reasonable inference that ABS and Genus did not intend to perform under the five-year renewable contract when they entered into it nearly four years ago. Furthermore, the most ST provides by way of evidence of ABS’s contrary intent at the time of contracting is: (1) a statement during an internal presentation that ABS “need[ed] to buy more time to have a product at parity to compete with ST”; (2) ABS’s internal projection made in January of 2012 that GSS could begin production in April of 2013; (3) “ABS solidif[ying] its plan to launch its GSS technology by 2014”; and (4) documents dated nine months after the Agreement showing that ABS had already considered the cost of cancelling the Agreement and marketing the GSS technology. (Defs. Opp’n Br. (dkt. #334) at 54.) Even taken together, these pieces of evidence cannot support a claim for fraudulent misrepresentation under Texas law because they do not demonstrate that ABS and Genus “had no intention” of performing under the contract when they made the alleged misrepresentations. T.O. Stanley Boot Co., 847 S.W.2d at 222.

         ST also claims that ABS fraudulently omitted details about its laser-kill GSS technology, and thereby “intentionally created the false impression that its GSS technology would be covered by Section 18 during negotiations (and execution) of the 2012.” (Def.’s Opp’n Br. (dkt. #334) at 56.) “Generally, no duty of disclosure arises without evidence of a confidential or fiduciary relationship, ” Morris, 981 S.W.2d at 674, something an arms-length negotiation between sophisticated commercial entities simply not satisfy. To avoid this obvious conclusion, ST maintains instead that since ABS knew ST intended to prevent ABS from launching its GSS technology by including the non-compete clause in the Agreement, it thus created “the false impression that Section 18 covered its GSS technology.” (Defs.’ Opp’n Br. (dkt. #334) at 58.) At best, this claim is a stretch under Texas law. Compare Bradford v. Vento, 48 S.W.3d 749, 755-56 (Tex. 2001) (noting that Texas had not yet adopted “a general duty to disclose information . . . when a party makes a partial disclosure that, although true, conveys a false impression”), with Hoggett v. Brown, 971 S.W.2d 472, 487 (Tex. App. 1997) (“A duty to disclose may arise . . . when one makes a partial disclosure and conveys a false impression.”).

         Fortunately, this claim need not turn on an unsettled question of law, since the court has already determined that Section 18 does cover the GSS technology, making the matter essentially moot, except as it concerns the parties’ negotiation of a safe harbor provision. Of course, the underlying premise that any alleged subterfuge by ABS created a duty to disclose is also flawed. Specifically, even if true, ST’s assertion that ABS had knowledge of its purpose in pursuing a non-compete clause did not create a duty to disclose more details about the development of its technology. If anything, that is what an arms-length negotiation is all about. If ST wanted additional information regarding the technology, or assurances as to its falling under Section 18, that is what due diligence leading up to contract, and representations and warranties in contracts, are intended to address.

         This does not give carte blanche to a contracting party to lie, or even withhold information when a duty to disclose does exist (or even when a failure to disclose would amount to a lie), but none of the evidence here supports a reasonable jury finding that ABS lied or failed to disclose facts amounting to a lie, especially since ST wholly fails to specify what particular alleged “partial disclosures” made ABS’s affirmative representations misleading. Accordingly, ABS and Genus are entitled to summary judgment on ST and XY’s fraudulent misrepresentation claims.

         F. Promissory Estoppel

         ST’s promissory estoppel claims fail for largely the same reasons. Under Texas law, “[p]romissory estoppel may be utilized to enforce a promise when a plaintiff justifiably and reasonably relies on the promise to his detriment, it was foreseeable that the plaintiff would rely on the promise, and injustice can only be avoided by enforcement of the promise.” Esty v. Beal Bank S.S.B., 298 S.W.3d 280, 305 (Tex. App. 2009). Plaintiffs’ statements regarding their intention to perform under the life of the contract are not promises that are sufficiently definite to be enforced under promissory estoppel. Rather, it is a non-actionable, “speculation of future events, a statement of hope, an expression of opinion, an expectation, or an assumption.” Id. Of course, those same representations are also part of a binding contract between the parties, and that is where ST’s remedy lies, if any. See El Paso Healthcare Sys., Ltd. v. Piping Rock Corp., 939 S.W.2d 695, 699 (Tex. App. 1997) (a party asserting promissory estoppel must “prove that the promise on which it relied to its detriment was outside” any contract between the parties).[7]

         II. Antitrust Claim

         ABS alleges that ST has monopolized and exercised market power in the alleged “Sexed Bovine Semen Processing Market” in violation of Section 2 of the Sherman Act (Am. Compl. (dkt. #226) ¶ 98.) ABS further claims that ST’s conduct in maintaining its monopoly in the sexed semen market is anti-competitive, pointing to the Sorting Agreements ST has entered into with it and other bull studs that include multi-year commitments, minimum purchase requirements, as well prohibitions of or disincentives placed upon the research, development or commercialization of new technology. Finally, ABS claims that ST engages in unfair competition through its patent acquisitions and licenses.

         In seeking summary judgment as to these claims, ST disputes that it has monopoly power, taking issue in particular with ABS’s proposed market, arguing that: it is too narrow because conventional semen is the dominant product in the overall semen market; ABS’s sales are largely of conventional semen; and the relevant market is not just limited to the United States. In support, ST asserts that consumers view sexed and conventional semen as interchangeable, and that dairy farmers’ demand for both conventional and sexed semen is highly elastic, depending on each individual’s farmer’s needs and circumstances, as well as the price of milk.

         ST likewise disputes each of ABS’s arguments that the Sorting Agreements are anti-competitive, arguing first that ABS and third-party bull studs like Microbix and CRI have been able to develop technology that competes with ST. Second, ST contends that the terms of the contracts are not anti-competitive because: (1) they have differing start dates and durations; (2) the purchase requirements are justified to offset significant costs ST incurs; (3) its customers are permitted to purchase additional straws from other suppliers; and (4) the duration of the contracts actually benefits the customers because they guaranty continuity of supply. Finally, ST disputes that its acquisition of patents constitutes exclusionary conduct, arguing that its acquisitions were investments in development of its product and that ABS has not shown that it was harmed by ST’s patent acquisitions and licenses.

         Turning to ABS’s substance of the monopoly claim under § 2 of the Sherman Act, a plaintiff must first show that the defendant has monopoly power in the relevant market. United States v. Grinnell Corp., 384 U.S. 563, 571 (1966).[8] “The second element of a § 2 claim is the use of monopoly power ‘to foreclose competition, to gain a competitive advantage, or to destroy a competitor.’” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 482-83 (1992) (quoting United States v. Griffith, 334 U.S. 100, 107 (1948)). Put differently, § 2 prohibits “the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” Grinnell Corp., 384 U.S. at 571-72. For the reasons that follow, the court finds that ABS has adequately established ST’s position as a monopolist in the U.S. market for sexed bovine processing, but has failed to establish per se violations of its use of that power. At the same time, ST has not established on the record at summary judgment that no reasonable jury could find the aggressive efforts made to maintain that monopoly position has crossed the line of exclusionary conduct prohibited by § 2 of the Sherman Act.

         A. Relevant Market

         “A relevant market is comprised of those ‘commodities reasonably interchangeable by consumers for the same purposes[.]’” Fishman v. Estate of Wirtz, 807 F.2d 520, 531 (7th Cir. 1986) (quoting United States v. E.I. Du Pont de Nemours & Co., 351 U.S. 377, 395 (1956). “The outer boundaries of a product market are determined by . . . the cross-elasticity of demand between the product itself and substitutes for it.” Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). Within broad markets, submarkets may exist, which themselves “constitute product markets for antitrust purposes.” E.I. Du Pont de Nemours & Co., 351 U.S. at 593-95. “The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.” Brown Shoe Co., 370 U.S. at 325. The determination of a relevant market requires “a factual inquiry into the ‘commercial realities’ faced by consumers.” Eastman Kodak Co., 504 U.S. at 482.

         With the support of its economic expert, ABS contends that the relevant market is “the market for sexed semen processing services in the U.S.” (Pl.’s Opp’n Br. (dkt. #324) at 24.) Relying on its own expert, ST criticizes this definition as too narrow because it fails to include “both the processing and downstream sales of conventional semen, ” and the geographic region should be worldwide. (Def.’s Opening Br. (dkt. #275) at 44.) The core of ST’s argument is that the relevant market must incorporate downstream products and services because “downstream competition constrain[s] the prices that ST may impose for its sexed semen processing services.” (Id.)

         The Supreme Court outlined the pertinent analysis concerning the interchangeability of products in a § 2 case in E.I. du Pont de Nemours & Co.:

Monopoly power is the power to control prices or exclude competition. It seems apparent that du Pont’s power to set the price of cellophane has been limited only by the competition afforded by other flexible packaging materials. Moreover, it may be practically impossible for anyone to commence manufacturing cellophane without full access to du Pont’s technique. However, du Pont has no power to prevent competition from other wrapping materials. The trial court consequently had to ...

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