Finding sufficient evidence, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s preliminary injunction blocking the sale and marketing of a purported knockoff cardiovascular drug. The Fifth Circuit, however, concluded that the preliminary injunction was overbroad and instructed the district court to narrow its scope on remand. Daniels Health Sciences, LLC v. Vascular Health Sciences, LLC, Case No. 12-20599 (5th Cir., Mar. 5, 2013) (Clement, J.)
Following a 2007 bankruptcy of a dietary supplement company, Plaintiff Daniels Health Sciences (DHS) acquired intellectual property relating to Provasca, a dietary supplement that contains a seaweed extract that allegedly helps repair and maintain blood vessel walls. In 2011, DHS disclosed the confidential science and research behind Provasca to defendant Vascular Health Sciences (VHS) and engaged VHS to market the supplement to potential investors. Licensing negotiations between DHS and VHS eventually failed in February 2012, after which VHS began marketing a rival supplement named Arterosil containing the same seaweed extract as Provasca.
DHS filed suit, accusing VHS of breach of contract, misappropriation of trade secrets and trademark violations. The district court subsequently issued a preliminary injunction preventing VHS from using DHS’s confidential information to research or sell Arterosil.
On appeal, the Fifth Circuit upheld the preliminary injunction, finding that DHS sufficiently met the standard for a preliminary injunction. The Court concluded that the compiled science and research behind Provasca disclosed to VHS constituted a trade secret compilation and, even in the absence of an express agreement, VHS should have understood that receipt of such information established a confidential relationship between the two parties. Consequently, since VHS began to market Arterosil within a few months of breaking ties with DHS, the district court did not err in concluding that VHS likely misappropriated the trade secret to develop Arterosil. The Court further concluded that DHS will likely be able to prove damages at trial since VHS’s alleged breach and misappropriation may adversely affect U.S. Food and Drug Administration approval for medical use of Provasca, thereby potentially making it difficult for DHS to secure research funding for the drug.
The Court, however, agreed with VHS that the preliminary injunction issued by the district court was overly broad. The preliminary injunction prohibited VHS from disseminating copies of publicly available journal articles disclosed to VHS during discussions with DHS, and further barred VHS from marketing or selling drugs unrelated to Provasca if they were based on general cardiovascular health information received from DHS. Accordingly, the Court remanded the case and instructed the district court to narrow the breadth of the injunction.