Elysium's Reply Resisting Production of Alternative Source of Mystery NR

Background

On October 25, ChromaDex moved to compel Elysium to produce a variety of documents.

On November 9, Magistrate Judge McCormick told the parties to try harder to work out their differences on the Discovery issues.

On December 1st, the parties revealed that they had resolved all of the Discovery issues except whether Elysium had to reveal its source of Mystery NR, and a briefing schedule was set for the remaining issue.

On December 4th, ChromaDex asserted five reasons why it needed information about the availability of Mystery NR in order to respond to Elysium's claims.

On December 8th, Elysium filed its reply brief, which you can read here:

Elysium's Reply Brief Challenging ChromaDex's

Alleged Need To Learn About Mystery NR Sourcing

ChromaDex's Arguments

In support of its motion to compel, ChromaDex said it needed to Alternative NR sourcing information because of these five components of Elysium's claims:

1. Patent Misuse

2. Elysium's Lost Profits

3. Unclean Hands

4. Substantial Similarity of PteroPure/Resveratrol

5. Substantial Performance

Items 2-5 involve the breach of contract claims. Nonetheless, Elysium's brief is almost entirely focused just on item 1.

I don't know if that means that Elysium thinks claims 2-5 are too weak to require a response, or what. When I reviewed them on Monday, I said I didn't think Elysium would be able to mount a good response to #3, and maybe not #4. In any case, they did not try.

Elysium's Reply

Instead, Elysium makes three arguments.

First, that ChromaDex keeps changing its story, which I think is meant to suggest that ChromaDex does not have a "real" reason for needing this information.

Second, that the alleged Patent Misuse occurred at the moment the Trademark License and Royalty Agreement was signed, and nothing afterwards is relevant.

Third, even if the documents are relevant, they aren't relevant ENOUGH given that they might prove useful for ChromaDex to set up a future patent infringement action.

Before we look at those arguments, let's examine this quote from the beginning of Elysium's brief, which is just exactly the kind of thing we are used to hearing from Elysium:

In August 2017, ChromaDex (which had recently introduced its own product in competition with Elysium's product, Basis) submitted what Elysium contends to be a sham citizen petition to the FDA claiming the newly-sourced NR in Basis posed a danger to consumers because it purportedly contained trace amounts of a solvent. Elysium commenced litigation in the Southern District of New York on September 27, 2017, for this disparagement. On October 26, 2017, ChromaDex, represented by the same counsel as it is here, served Elysium with a complaint in the same court echoing its sham petition. Discovery has been stayed in both actions. [emphasis added]

Lawyers have a well-deserved reputation for being loose with their facts, and this is a good example of how that happens.

ChromaDex's FDA petition noted that Mystery NR is different from Niagen and lacks an NDIN. ChromaDex requested that the FDA (1) Determine that Mystery Basis is is adulterated and (2) Determine that Mystery Basis contains a new dietary ingredient that lacks an NDIN.

ChromaDex's complaint in the SDNY reads as follows:

Elysium’s pattern of behavior with respect to ChromaDex reflects a nefariously conceived plan to damage and/or steal ChromaDex’s NR, reputation, employees, goodwill, and stature in the industry, as well as its customer opportunities. Elysium’s marketing falsely “borrows” ChromaDex’s research and regulatory achievements to endorse Elysium’s new product, and Elysium has maliciously targeted ChromaDex, its employees, and its commercial relationships by disseminating falsehoods about ChromaDex and refusing to pay for large orders – all with the intent of undermining ChromaDex’s viability and ability to compete. On information and belief, Elysium falsely disseminated untrue information to investors about ChromaDex’s financial health to further interfere with ChromaDex’s ability to raise money and defend itself against Elysium’s multi-front litigation and deceptive advertising war. And, on further information and belief, Elysium and/or its agents are associated with or responsible for stock “short attacks” intended to drive the share value of ChromaDex down, making it a more accessible take-over target.

I've never heard an "echo" that sounded like that, nor one that asserted new claims for false advertising, deceptive trade practices, and tortious interference with business relationships, and requested $200M in damages. That's one hell of an echo.

In law school I was taught that the facts are the facts, but how you characterize them shapes the meaning of the story you are telling.

At some point, though, the characterization of the facts is so blatantly implausible that your vocation has changed from "advocate" to "spewer-of-bullshit."

In this instance, it apparently suits Elysium's purpose in its recounting of the factual and legal background of the case to characterize ChromaDex's claims in such a way as to minimize the substance of ChromaDex's claims, or to implicitly extend Elysium's "sham" characterization of the petition to all of ChromaDex's claims.

I was also taught in law school that K-Mart quality inaccuracies like this were a bad practice. I was once in a courtroom and witnessed an attorney reprimanded for referring to an opposing party -- "Big Bear Development Properties" -- as "Big Properties." The judge considered that unprofessional, and directed the use of a non-pejorative referent. But that was a distant time, and apparently cheap shots are how the game is played today, at least in the Central District of California.

Substance of Elysium's Reply

1. ChromaDex Keeps Changing Its Story

This is just whining. There is no suggestion of a procedural violation or prejudice. Theories develop over time. In fact, I would think the most plausible scenario in typical litigation is that you make a request, and you don't bother to think of every probable legal justification until the request is denied and you are filing your brief in support of a motion to compel.

Legal bills would be worse than they are if attorneys had to present every request for production as a fully briefed motion to compel or suffer the kind of prejudice that Elysium is requesting here, and Skadden knows that. So I think Elysium's narrative here is not only whining, it is also disingenuous. We have already seen them argue in the New York litigation that private communications subsequently distributed both "are" and "are not" advertisements, depending mostly on which side of the claim they are on.

2. Market Power Matters Not After the Contract Was Signed

This seems to me wrong for two reasons.

First, if Elysium could just make and sell its own NR now, why couldn't it have done that earlier? Elysium's current behavior seems highly relevant to market power throughout the period.

Second, and more subtle, the ONLY remedy for Patent Misuse is to stop the Patent Misuse. So there is no way for Elysium to relegate the inquiry to past events.

By desperately keeping their Patent Misuse claim alive (despite its being mooted by ChromaDex's disclaiming damages and offering to deposit any funds owned to Elysium with the Court), Elysium has committed itself to the proposition that there is a continuing controversy involving an ongoing patent misuse that has not been purged, and by definition that means all the elements of the patent misuse.

It seems to me that if Elysium could easily source Mystery NR now, in a way that it could have easily done a few years ago, then ChromaDex never had market power and there was never a Patent Misuse, and there certainly isn't an ongoing patent misuse. So I don't see how Elysium gets to continue asserting a Patent Misuse claim but to deny discovery on the elements of patent misuse. [Note: I'm making this argument only in the context of the discovery dispute; in reality, there wasn't ever a patent misuse because ChromaDex never charged for its trademarks in the first place. Elysium has not once, to my knowledge, explained why ChromaDex would have done the nonsensical thing that Elysium says ChromaDex did, against all evidence.]

3. Prejudice Outweighs Relevance

I don't really know how to weigh this argument. The whole patent misuse claim is bogus, and ChromaDex doesn't need Discovery to assert a patent infringement claim -- it could just assert it based on its own lab analysis of Mystery NR. So how do you balance relevance to a bogus claim against the risk of inconsequential misuse? You got me.

Conclusion

I have been wrong more often than I have been right when I have tried to predict what the Central District of California will do. However, this motion is being heard by a new jurist (Hon. Douglas McCormick) and a new law clerk, so it is possible that this motion will be viewed through a different lens than we have seen.

A hearing is scheduled for first thing Wednesday morning December 13, so we'll know shortly.

#ElysiumHealth #ChromaDex #CDXC #Litigation