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Guard Ant Health, Inc. v. Foundation Medicine, Inc.

United States District Court, N.D. California

November 6, 2017




         Plaintiff Guardant Health, Inc. ("Guardant") filed this action against its competitor in the liquid biopsy assay market, Foundation Medicine, Inc. ("FMI") alleging that FMI's marketing and advertising practices violate state and federal law. Shortly after Guardant brought suit, Ropes & Gray entered an appearance on FMI's behalf. Guardant's motion to disqualify Ropes & Gray is now pending before the Court.[1] (Dkt. No. 33.) Having considered the parties' briefs and having had the benefit of oral argument on October 26, 2017, the Court GRANTS Guardant's motion. Guardant was a client of Ropes & Gray at the time Ropes & Gray entered an appearance on FMI's behalf; Ropes & Gray therefore breached its duty of loyalty to Guardant through concurrent representation of a party whose interests are adverse to Guardant's.


         Guardant is a biotechnology company which specializes in DNA sequencing and cancer diagnostics. (Complaint ¶ 5.) It was the first company to develop and commercialize a liquid biopsy assay to identify genomic biomarkers for advanced solid tumors using “cell-free circulating tumor DNA” or “ctDNA” from non-invasive blood draws. (Id.) The Guardant360 liquid biopsy cancer assay helps identify targeted treatment options based on changes in cancer cells. (Id. at ¶ 6.)

         In connection with this work, in 2013 Guardant acquired U.S. Patent 7, 700, 286 (“‘286 Patent”) which is directed to “methods for the diagnosis and monitoring the progression of cancer by measuring gene amplification in a bodily fluid, such a blood, colloquially referred to as “liquid biopsy.” (Dkt. No. 31-8, Declaration of John Storella, ¶ 2.) Later that same year, Guardant also filed an application for a continuation reissue patent based on the ‘286 Patent, Application No. 14/039, 168 (“‘168 Application” or the “Stroun Patent”). Wilson Sonsini Goodrich & Rosati (“Wilson Sonsini”) represented Guardant for purposes of this application and prosecution. (Dkt. No. 31-7, Declaration of William M. Smith, ¶ 3.) The United States Patent & Trademark Office (PTO) issued a final rejection of this application in April 2015 which was followed by an advisory action in July 2015 informing Guardant that it had not overcome the reasons for rejection. (Dkt. No. 31-8 ¶ 4.)

         Around that time, Guardant's outside intellectual property counsel, John R. Storella, of John Storella, P.C., recommended that Guardant retain James Haley, Senior Counsel at Ropes & Gray, to represent Guardant with respect to patent prosecution activity and to prepare a Request for Continued Examination (RCE) of the ‘168 Application. (Id. ¶ 5.) Mr. Storella contacted Mr. Haley in August 2015 and Mr. Haley agreed to the representation on behalf of Ropes & Gray with Mr. Haley providing an estimate of $30, 000-$40, 000 for the work. (Id. ¶ 6.) On October 2, 2015, Guardant and Ropes & Gray executed an engagement letter. (Dkt. No. 38-1 at 9 (Ex. A).[2]) The engagement letter states that Ropes & Gray agrees to represent Guardant “in connection with the prosecution of U.S. patent application 14/039, 168 (a reissue of U.S. patent 7, 700, 286) related to methods of diagnosis or monitoring cancer by measuring gene amplification, including a potential appeal to the Patent Trial and Appeal Board on various 101 issues and if unsuccessful, an appeal to the Federal Circuit.” (Id.) According to the agreement, the representation “will end when we have completed our work on the matters for which you have engaged us, or when either of us informs the other that the representation has ended (including by transmittal of our final bill on those matters).” (Id. at 13.)

         Ropes & Gray thereafter worked with the Wilson Sonsini team and Mr. Storella on Guardant's patent prosecution strategy. (Dkt. No. 31-8 at ¶ 9.) In particular, Ropes & Gray helped prepare the RCE and developed expert testimony to support the conclusion that the claims in the patent were not obvious. (Id. ¶¶ 9-10; Dkt. No. 55-9, Declaration of James F. Haley, ¶ 6.) Mr. Haley, on behalf of Ropes & Gray, recruited an expert to prepare a declaration and he assisted with drafting and editing the declaration of another expert. (Dkt. No. 31-8 ¶ 10.) In late May 2016, Guardant filed the RCE which relied considerably on the declarations of the two experts. (Id. ¶ 12.)

         That same month, FMI sued Guardant for patent infringement in the Eastern District of Texas. (Id. at ¶ 11.) Mr. Haley brought the suit to Guardant's attention and sought to discuss whether Ropes & Gray could defend Guardant in the patent infringement action. (Id.; Dkt. No. 31-8 at 17 (Ex. B).) Mr. Haley initially contacted Guardant regarding representing it, but when a conflicts check indicated that FMI was a current client of Ropes & Gray he elected not to pursue it further. (Dkt. No. 55-9 ¶ 10.) Regardless, Guardant ultimately elected to retain other litigation counsel. (Dkt. No. 31-8 ¶ 11.)

         Ropes & Gray submitted its first bill to Guardant in February 2016 for approximately $20, 000 which was followed by a second bill in June 2016 for $87, 000. (Id. ¶ 12.) Guardant paid the February invoice, but objected to the June invoice. (Id.) The fee dispute was resolved with Guardant agreeing to pay $40, 000 of the June bill and allocating the remaining $47, 000 for subsequent work including:

• $10, 000 flat rate for [Mr. Haley/Ropes & Gray] to prepare for and attend an interview on the Stroun patent at the USPTO with WSGR.
• $40k flat rate for an opinion of non-infringement/invalidity of the [third-party] patent.
• Any amount left over (if you do not do one of these projects) to a future project.

(Dkt. No. 31-8 at 22 (Ex. C).)

         Guardant was notified in mid-August that its in-person interview at the USPTO on the Stroun patent would be held on September 13, 2016. (Dkt. No. 38-1 ¶ 13.) Two Wilson Sonsini attorneys attended the interview in person, another Wilson Sonsini attorney, Mr. Storella, and one of the experts participated by phone. (Id.) Mr. Haley did not attend the in-person interview- Guardant contends this was because Guardant wanted him to focus on the third-party patent, but Mr. Haley assumed it was because Guardant did not want to overwhelm the examiner by having too many people present. (Id. ¶ 14; Dkt. No. 55-9 ¶ 17.) However, Mr. Haley was copied on a summary prepared by one of the Wilson Sonsini attorneys who attended, which also stated that Wilson Sonsini attorneys would draft amended claims to submit for Mr. Storella for review. ((Dkt. No. 55-9 ¶ 18.) Guardant is still awaiting a decision from the PTO on the RCE for the Stroun patent. (Dkt. No. 38-1 ¶ 13.)

         With respect to the third-party opinion letter, in November 2016, Mr. Strorella sent Mr. Haley a slide deck prepared by Wilson Sonsini which contained a confidential description of aspects of Guardant's technology and review of other parties' patent filings. (Id. at ¶ 14.) Mr. Haley does not recall seeing this document; he may have sent it to his Technical Advisor, but he is not sure. (Dkt. No. 55-9 ¶ 21.) Although Mr. Storella contacted Mr. Haley repeatedly between January 2017 and April 2017 regarding the promised third-party patent opinion letter, Mr. Haley repeatedly reported that he had not had time to work on it yet, but he expected to soon. (Id. at ¶ 22; Dkt. No. 38-1 ¶ 14.) On April 1, 2017, Mr. Storella contacted Mr. Haley seeking an update and stating “Please confirm ...

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