Biopharm Firm Sues Colgate for $1 Billion
SALT LAKE CITY (CN) - A biopharm company sued Colgate for $1 billion, claiming the consumer giant stole trade secrets to make mouthwashes and toothpastes.
N8 Medical sued Colgate-Palmolive in Federal Court. It claims Colgate breached contract and stole trade secrets on synthetic antimicrobial compounds called ceragenins, and secretly tried to patent them itself, after deciding that N8's drugs were "too expensive."
Ceragenins also are known as cationic steroid antibiotics, and have "broad spectrum antimicrobial activity, as well as numerous other therapeutic activities and attributes of value in health care," N8 says in the lawsuit.
More than $8 billion of Colgate's annual reported revenue of $17 billion comes from oral healthcare products, N8 Medical says.
Brigham Young University developed ceragenins and licensed them to N8 for commercial development, according to the complaint.
N8 Medical claims it approached Colgate in 2010 about using ceragenins in Colgate mouthwashes, toothpastes and other oral health products.
N8 claims the parties entered confidential disclosure and material-transfer agreements, allowing "N8 Medical to make a confidential and limited transfer of ceragenins to Colgate for limited testing purposes, as well as to provide Colgate access to N8 Medical's information and confidential information regarding all ceragenins, while at the same time protecting and safeguarding N8 Medical's extremely valuable proprietary information and ceragenin compounds." (Citations omitted.)
After initial studies and experiments yielded positive results, Colgate "secretly pursued" its interest in the ceragenins by filing an international patent application, breaching contract terms, N8 Medical says.
And after years of licensing negotiations, Colgate told N8 Medical that the ceragenins were "not efficacious" and "too expensive," the complaint states.
"Rather than negotiate in good faith concerning a licensing agreement or other acceptable business relationship, Colgate ultimately told N8 Medical that its ceragenins were not efficacious, were too expensive, too timely and costly to pursue regulatory approval, and inherently shelf life unstable," the lawsuit states. "That Colgate representation was completely opposite of prior Colgate communications, statements and representations, and completely inconsistent with all of the Colgate information that had been shared with N8 Medical previously. Colgate previously indicated a willingness to pay significantly more than its current antimicrobials for the ceragenin technology, stability of aged ceragenin material, and a strategy for entering territories outside the United States quickly where the ceragenin compounds would be regulated as a cosmetic ingredient and allow a more expedited path to market."
Colgate also refused to hand over ceragenin study results and skewed its testing of the compounds, N8 Medical claims.
"On information and belief, Colgate hid, misrepresented or skewed the methods or results of its testing, the fact that it had secretly filed for a patent based on N8 Medical's ceragenins, in order to avoid having to pay N8 Medical any compensation, including a reasonable royalty or share of the profits for use of N8 Medical's ceragenins and other confidential and trade secret information, or compensation owed under the agreements," the 22-page complaint states.
N8 Medical estimates it would have earned $30 million in annual royalties in a deal with Colgate, given the company's 21 percent worldwide market share of mouthwash products..
It seeks more than $1 billion in damages for breach of contract, theft of trade secrets, conversion, breach of faith and unjust enrichment.
It is represented by Brent Hatch with Hatch, James & Dodge.