Glaxo Group Limited v. DRIT LP
248 A.3d 911
Del.2021Background
- GSK and Biogen disputed priority to a lupus‑treatment method; they settled by agreement in 2008 giving GSK patent rights and Biogen (later assignee DRIT) royalty payments tied to the last “Valid Claim.”
- The Agreement defined “Valid Claim” to exclude claims that had been “disclaimed,” among other term‑ending events.
- GSK obtained U.S. Patent No. 8,071,092, paid royalties, and later DRIT acquired Biogen’s rights under the Agreement.
- In 2015 GSK filed a statutory disclaimer of the ’092 patent, notified DRIT, and stopped royalty payments.
- DRIT sued for breach of contract and breach of the implied covenant of good faith and fair dealing; the Superior Court dismissed the contract claim, allowed the implied covenant claim to go to trial, and a jury found for DRIT.
- On appeal the Delaware Supreme Court held the contract unambiguously permitted disclaimer and reversed the jury verdict, ruling the implied covenant could not be used to override an express contractual right to disclaim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GSK’s statutory disclaimer breached the Agreement (breach of contract) | DRIT: “disclaimed” in the Valid Claim definition requires a court/agency order; voluntary disclaimer does not terminate royalty obligation | GSK: Definition plainly excludes disclaimed claims; voluntary statutory disclaimer ends Valid Claim and royalties cease | Held: Agreement permits voluntary disclaimer; breach of contract claim properly dismissed |
| Whether the implied covenant can limit GSK’s express contractual right to disclaim | DRIT: Parties did not foresee strategic, voluntary disclaimer that gutted royalty stream; implied covenant requires GSK to exercise disclaimer in good faith | GSK: Implied covenant cannot be used to alter express terms; parties negotiated and accepted disclaimer risk | Held: Implied covenant cannot be used to vary or negate an express contractual right; verdict for DRIT reversed |
| Whether there was a factual dispute requiring trial on bad‑faith disclaimer (JML issue) | DRIT: Evidence supported jury finding GSK disclaimed solely to avoid royalties | GSK: No gap in contract; JML warranted because disclaimer was authorized as a matter of law | Held: No legal basis for implied‑covenant claim; summary judgment/JML should have been entered for GSK on that claim |
Key Cases Cited
- Nemec v. Shrader, 991 A.2d 1120 (Del. 2010) (explaining limits of implied covenant; courts enforce written contracts as drafted)
- Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434 (Del. 2005) (implied covenant not a tool to rewrite contract)
- Oxbow Carbon & Materials Hldgs., Inc. v. Crestview‑Oxbow Acquisition LLC, 202 A.3d 482 (Del. 2019) (implied covenant applies where contract confers discretion that must be exercised in good faith)
- Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126 (Del. Ch. 2009) (discussing implied covenant when contract leaves material decisions to one party)
- Rubick v. Security Instrument Corp., 766 A.2d 15 (Del. 2000) (last‑antecedent rule in contract interpretation)