Kenton Crowley v. Epicept Corp.
883 F.3d 739
9th Cir.2018Background
- Drs. Crowley and Flores assigned two patents on a topical ketamine formulation (NP‑2) to EpiCept under a December 2000 Agreement that required written notice of any "Improvements" and gave remedies (including return of patents) on material breach and for specified failures to use commercially/scientifically reasonable efforts with the FDA.
- Prior to the Agreement, Dr. Flores treated a few burn patients with NP‑2 but did not disclose that use to EpiCept; parties disputed whether that use was an "Improvement" within the Agreement and whether nondisclosure was material.
- The Doctors terminated the Agreement in 2006 and sued EpiCept (breach of contract, implied covenant, fraud, rescission); after interlocutory proceedings the case proceeded to jury trial in the Southern District of California.
- At trial EpiCept argued the Doctors materially breached by failing to timely disclose the burn use (violating §2.1) and therefore EpiCept was excused from returning the patents; the Doctors contested materiality and sought various jury instructions (including on adoptive admissions and waiver of the 90‑day cure provision).
- The district court excluded the Doctors’ damages expert (Pedersen) as unreliable under Daubert; the jury returned verdicts for EpiCept on all counts, and the district court denied the Doctors’ Rule 59 new‑trial motion.
- The Ninth Circuit majority affirmed, holding (inter alia) the Doctors waived some instruction challenges, the instructions given correctly stated New Jersey law and adequately informed the jury that only a material breach by the Doctors could defeat their breach claim, the court’s answer to a jury question was proper, and the evidentiary challenges were waived or harmless. Judge Wardlaw dissented in part, arguing the materiality finding lacked substantial evidence and the jury was inadequately instructed on material breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether jury should have been required to decide as a preliminary issue if Flores’s burn treatments were an "Improvement" under the Agreement | Crowley: the jury must be instructed to decide whether the burn use constituted an Improvement/infringement before finding breach | EpiCept: the instruction agreed by parties covered the elements and omission of infringement law was deliberate; factual question for jury | Waived by Plaintiffs (they agreed to the instruction at conference); no reversible error |
| Whether the jury was adequately instructed that only a material breach by the Doctors could defeat their breach claim (mutuality concern) | Crowley: instructions failed to make clear materiality applied equally to Plaintiffs’ failure and the court should have more fully defined materiality | EpiCept: instructions (together) defined materiality and Plaintiffs could argue applicability in closing | No abuse of discretion; instructions correctly stated NJ law and sufficiently informed jury |
| Whether the district court’s response to the jury’s question about timing of burn treatment was inadequate | Crowley: court’s reply was cursory and failed to clarify a material factual/legal point | EpiCept: jury asked factual question; court properly directed jurors to evidence and instructions rather than answering facts | Affirmed: court acted within discretion by sending jurors back to instructions and evidence |
| Whether the verdict lacked evidentiary support / new trial warranted (including Rule 50 issue) | Crowley: no rational jury could find nondisclosure was a material breach; motion for new trial should have been granted | EpiCept: evidence supported material breach (testimony that clause and disclosure were important); Plaintiffs waived direct sufficiency challenge by not making Rule 50(a)/(b) | Plaintiffs waived Rule 50 challenge; denial of Rule 59 new trial not an abuse—there was sufficient evidence for a jury to find material breach |
Key Cases Cited
- Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (expert admissibility standard)
- Energy Transp. Grp., Inc. v. William Demant Holding A/S, 697 F.3d 1342 (Federal Circuit discussion on improvement/infringement interplay)
- Kode v. Carlson, 596 F.3d 608 (standard for Rule 59 new trial review; "absolute absence of evidence" rule)
- Nitco Holding Corp. v. Boujikian, 491 F.3d 1086 (Rule 50(b) prerequisite to appeal on sufficiency)
- Magnet Res., Inc. v. Summit MRI, Inc., 723 A.2d 976 (New Jersey authority on material breach question for the jury)