Discovery is stayed pending mediation in he SDNY litigation, but discovery is underway in the CDCal litigation. Today ChromaDex filed its supplemental brief explaining why Elysium ought to be compelled to produce documents relating to its alternative sourcing of "Mystery NR." You can read the brief here:
It's a strong argument.
ChromaDex asserts five reasons why it needs to know how Elysium is getting its Mystery NR:
1. Patent Misuse Defense
Elysium's Patent Misuse Claim requires that it establish that ChromaDex has market power in the tying product (NR). The availability of alternative sources obviously is relevant to assessing whether ChromaDex has market power in the market for Nicotinamide Riboside.
2. Elysium's Lost Profits
Elysium's claim that ChromaDex breached the Niagen/PteroPure exclusivity provision requests recovery of lost profits, but those can't be ascertained without knowing the cost and the timing of the availability of an alternative NR source.
3. Unclean Hands Defense
ChromaDex has an unclean hands defense against all of Elysium's breach of contract claims
As one example, CMDX should be able to discover whether Elysium was already negotiating for, or had secured, an alternative source of NR when Elysium signed the Supply Agreement, when it subsequently demanded exclusivity in February 2016, and/or when it placed its June 30, 2016 order for NR to create a charade case for receiving the MFN pricing. Further, the efforts expended by Elysium to persuade third parties to manufacture NR when it was known that CMDX was the exclusive licensee of patents relating to the manufacturing process are relevant to Elysium’s unclean hands.
4. Substantial Similarity
Elysium claims that ChromaDex violated the exclusivity provision by allowing third parties to sell Niagen with Resveratrol, and the definition of "substantial similarity" is disputed. So ChromaDex wants to know what Elysium understands by the phrase "substantially similar," which can be shown by its behavior with respect the Niagen component of the Basis product -- did Elysium insist on actual NR, or something substantially similar?
5. Substantial Performance
ChromaDex asserts as a defense to the breach of contract claims that Elysium did not substantially perform its duties under the contract.
“Substantial performance” requires “that there be no willful departure from the terms of the contract.” Thomas Haverty Co. v. Jones, 185 Cal. 285, 289 (1921); 1 Witkin, Summary 11th Contracts § 843 (2017)); Murray's Iron Works, Inc. v. Boyce, 158 Cal. App. 4th 1279, 1291 (2008). The disputed documents will evidence whether Elysium willfully breached the Supply Agreement when it refused to pay for the June 30 order, because it had alternative sources lined up or had sources available for after it projected to exhaust CMDX’s NR.
These all seem like plausible theories to me. I'm not entirely sure I understand how numbers 2 & 5 work, but I cannot imagine how Elysium will be able to defeat arguments 1 & 3, and probably also 4.
We are expecting Elysium's opposition brief on Friday.