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INDEX NO. 653320/2012 RECEIVED NYSCEF: 01/10/2014

1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 dw DENISE WILLIAMS, RPR Official Court Reporter B E F O R E : HONORABLE JEFFREY K. OING, Justice A P P E A R A N C E S : Attorneys for Plaintiff: STANLEY K. SHAPIRO, ESQ. 225 Broadway - Suite 1803 New York, New York 10007 Attorneys for Defendant: KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 By: ATIF KHAWAJA, ESQ. SAMARA PENN, ESQ. SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK : CIVIL TERM : PART 48 _______________________________________ X INTELLECT NEUROSCIENCES, INC., Plaintiff - against PFIZER, INC., and RINAT NEUROSCIENCE CORP., Defendants _______________________________________X 60 Centre Street New York, New York January 8 , 2014 Index Number 653320/12

2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Pfizer. THE COURT: Thank you. THE COURT: -ProceedingsThe Court has before it the matter of

Intellect Neurosciences verses Pfizer, index number 653320 of 2012. This is Motion Sequence Number 2 which is a

motion by Defendants to dismiss the complaint. Just for the record, the complaint alleges two causes of action: First cause of actions are breach of

contract; second cause of action is for breach of the implied covenant good faith and fair dealing. It is a pre-

answer motion CPLR 3211(e)(7) for failure to state a cause of action. Parties enter their appearances for the record. For the Plaintiff? MR. SHAPIRO: the Plaintiff. THE COURT: Thank you. Stanley K. Shapiro, attorney for

For Defendants? MR. KHAWAJA: Atif Khawaja on behalf of Defendant

I'm pretty much familiar with what the facts are here since you all were here last time, I think, on a sealing order which I granted to the extent of redacting certain information. This is now their breach of contract.

I have to say, I was expecting a much larger contract, I mean larger complaint, and when I looked at it dw

3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsit was pretty straightforward in terms of what you are saying you are entitled to get under the contract. So, why should I dismiss this complaint for breach of contract? MR. KHAWAJA: The complaint should be dismissed,

Your Honor, because there is a necessary threshold condition that needs to take place before there can be a breach. They are seeking to recover a milestone payment

and I'm happy -- I'm sure you have a copy of the contract -THE COURT: I got it. But, Section 3.13 of the milestone


makes clear that before you can get the milestone and they are suing count one and we will get into count two in a second, but the breach claim is breach of the milestone and the milestone is only reached when the Plaintiff receives a patent that a licensed patent with at least one valid claim that covers a licensed product. THE COURT: But, isn't what has been -- isn't

what they are paying after this agreement from the U.S. Patent Office -- they did get a patent? MR. KHAWAJA: THE COURT: They did.

They did. No dispute.


They got a patent and that that dw

4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingspatent was for a product or was for a design or -MR. KHAWAJA: THE COURT: Method.

Method, thank you, that was part of

this agreement that was listed. MR. KHAWAJA: Absolutely not. That's what and

that's the fundamental issue that we have. If you go to Schedule One of that agreement it lists the IP that Pfizer received a license to. In other words, there were certain patents that Pfizer or that Intellect held at the time that the agreement was entered and this is, it should be page 17, and you see this list right here. It says Confidential at

the top, License Patent Schedule One on the top. THE COURT: I got Schedule One. Okay.


Top right. Right. So these are the things


that Pfizer received a license to in 2008 and, you know, as the Plaintiff pleads in Paragraph 28 of his complaint the patent that we are here today about didn't exist until 2012. So, if you look on this there are certain numbers here, I think its the fourth column from the right you can see various numbers, the patent number that we are dealing with today is not at issue here. There were six patents dw

5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 product. THE COURT: A licensed product. In other words, this is an You know, we paid the -- I -Proceedingsthat were covered here. You can see those. You can

identify them because it says issue in the right most column under status. THE COURT: Right. And those were the six issued


patents that existed at the time that the parties entered this agreement in 2008, and the Milestone Provision was basically a way for the parties to talk about future patents that Intellect might get. THE COURT: Right. Because once you get a patent

its worth more or, correct, or no? MR. KHAWAJA: You might never get a patent. You

may try to get a patent and many of the published -THE COURT: But, the milestone takes care of that

in the event there may come a point maybe during the life of this contract you get a patent, you get a payment for it. MR. KHAWAJA: To the extent it covers a licensed


insurance policy for Pfizer.

don't want to get into the amounts pursuant to the order before, but we paid a fee in 2008 to get the benefit of what existed at that time. dw

6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 THE COURT: -ProceedingsRight. We hold that now. We didn't know


if Intellect was ever going to get another patent if actually applied to what Pfizer did. set up. So the milestone was

That's why there is an infringement matter. THE COURT: But, didn't -- isn't it, the way I

read the record here is its the method or manner -- what is the word? MR. KHAWAJA: Alzheimer's. THE COURT: Method right. It's the method of Its a method of treating

treating Alzheimer's and there was a particular component of that and that was the -MR. KHAWAJA: THE COURT: Ponezumab. Where they are saying that


that was part of -- although its not specifically set forth in the schedule here, but that is part of what this whole deal was about was treatment of Alzheimer's and they got a patent specifically for that I can't -MR. KHAWAJA: Ponezumab. And For the record I

will spell it. P-o-n-e-z-u-m-a-b. THE COURT: That was the drug or that was the

component that treated Alzheimer's and that's what they got the patent for so that it covers, although it wasn't specifically, I should point it out, in Schedule One here dw

7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsthat's not here but its contemplated that its part of this whole Alzheimer's treatment so that that's what -- that's their complaint in a sense that that's why we are entitled to milestone. MR. KHAWAJA: There are two things, Your Honor.

First of all, they have not pled an allegation in their complaint and we can look through it. There is not a

single allegation in there that Pfizer has done anything with Ponezumab, with any Ponezumab product that would fall within this patent. But, the second thing is as a matter of contract interpretation. This contract does not say if you have

something related to Ponezumab they get the milestone fee, and the way that I would say the proof of that is in the licensed product definition because the Milestone Provision specifically calls for a licensed product and this is at page 2 of the contract. Section 1.11. Its the definition Section. Its

And this is, I think, the crux of the

dispute between us because the license product is defined to mean, and this is the direct quote, any product in any dosage form containing the Pfizer compound. stopped there that would be enough. Ponezumab. Now if it

That would be

Pfizer produced Ponezumab, no problem, but it

goes on and it goes on for 27 more words to say, the development, manufacture, use, sale or importation of wence dw

8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 compound. -Proceedingsproduct would absent the license granted by licensor to licensee herein infringe any valid claim in any license patent. So, its not enough that it just be the Pfizer If it was simply the patent that covered the Its this 27

Pfizer compound we wouldn't be here today. word criteria for licensed product. THE COURT:

I'm glad you highlighted it because

that 27 word it doesn't say -- it doesn't just say infringe. It says would infringe. MR. KHAWAJA: THE COURT: Agree.

Which means then its contemplated at Its not

that point its a potential or possibility.

necessarily a definite event because it doesn't say that infringes on, so which means that you would have to actually infringe before you get the milestone. It says would infringe which gives it the air of potentiality, air of -- its very broad in that sense in terms of what you can do, so that, you know, okay you may not use Ponezumab at all within any of the methods that you are treating or producing drugs, but that's not the question. The way this is set up or the contract, the way

this agreement is set up is would use or would infringe, so that you don't have to, as long as its there guess what, according to the Plaintiffs you got to pay me a milestone dw

9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsbecause now we got a patent for that particular method or for that particular compound. MR. KHAWAJA: So, same thing, first argument,

Your Honor, is its not pled in the complaint anywhere and I'm happy to go through. The closest they come is

Paragraph 32 where they say in the subjunctive in the passive voice that the use of Ponezumab by someone, somewhere would infringe the ones that have the patent. They haven't said that we do. They haven't said that we

are doing anything with Ponezumab, and the second point that I would really like to address here when you say would, yes its would infringe absent the license granted by licensor or licensee. So, its conditional. didn't have a license. THE COURT: You have a license. How do I have the license? Its would infringe if you


Sorry. I don't think we have the license.


You don't have -We don't get the license. The


milestone is the license. license. THE COURT:

The milestone acts as the

Wait a minute.

The whole -- the

whole agreement here is a licensing agreement. dw

10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -ProceedingsMR. KHAWAJA: THE COURT: That's true to the six patents.

To the six patents. Yes.


And the six patents, but there is

also on the schedule here the ones that are still pending. MR. KHAWAJA: THE COURT: Yes.

Correct? Yes.


So when the pending ones become

issued or when the pending ones become patent you get a patent for the pending ones doesn't that cover then the exact area that we are talking about here? MR. KHAWAJA: That's all -THE COURT: That's the contract. Now we are To the extent they cover, they do.

getting into the heart, the meat of the contract because then now the question becomes what does that mean though to the extent that we use it. MR. KHAWAJA: There has to be an allegation that

we are doing what is covered by the patent. THE COURT: Not according to the way this Maybe I

contract, at least the arguments I heard.

misunderstood the contract, but that when you don't have -when its still pending and later on it gets issued, okay, that its not so much that you're actually using the dw

11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingscompound or the Ponezumab that you were actually have covered here, its the potential. It just doesn't matter --

the way I read this argument or read the complaint or the contract here is that once you get an issued patent that's enough at this point to get the milestone triggered. That's at least what I think the Plaintiff is arguing. That it doesn't matter whether or not you use it at all but once I get a patent for it, guess what, if its covered in this schedule, Ponezumab is covered, guess what, whether you use it or not based on the argument or based on the way the contract is written their position, I'm not saying it's a valid position, their position in the complaint is guess what, the milestone has been triggered. for it. MR. KHAWAJA: THE COURT: I think that is their position. You owe us money

Yeah, and you're arguing otherwise.

You are saying no, that is just totally not what this contract or agreement says. MR. KHAWAJA: I think there are three terms in

the Milestone Provision that I come back to, license product we talked about imposes this would infringe requirement, and I think the reason why I come back to that, Your Honor, if it was simply that Ponezumab was sufficient to get the milestone you wouldn't put the would infringe language. dw

12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 THE COURT: -ProceedingsBy just highlighting by just making

those highlights in front of me right now we are getting past the pleading stage and we are getting to the guts of the contract which gets further down the road because at the pleading stage the question is whether or not they have stated a cause of action. Okay. You are saying that --

your first argument I thought was they didn't state a cause of action because its not covered in this contract. don't -- its not there. MR. KHAWAJA: THE COURT: And its not. We

That's your position.

But, then when you get further into the argument and I start raising some of these points about how their what Plaintiff's arguments are, it gets further away from your saying its not covered by this contract to maybe it is covered by the contract perhaps. And here is the other point, when you were saying its not alleged in the complaint, they have an affidavit I have an affidavit from Plaintiff that talks about or at least asserts that Pfizer, the Defendant, is testing Ponezumab in their studies. MR. KHAWAJA: THE COURT: Right.

So, that in a sense, you know, you

can always I can always look at other submissions to sort of amplify the pleadings on a Motion to Dismiss and that's dw

13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 at all. important. You're saying Ponezumab is not being used by us But they are asserting, accurate or not, that you -Proceedings-

guys are testing it. MR. KHAWAJA: THE COURT: Right.

Which means then it falls under this

whole general the compound Ponezumab which they got a patent for saying guess what, the milestone has been completed. MR. KHAWAJA: Your Honor, I come back to the

first point is this patent is not in that contract. THE COURT: Right. Its not there. It couldn't be

MR. KHAWAJA: there and the way -THE COURT:

Why couldn't it be there again? Because it didn't exist. And at


The patent didn't exist? The patent didn't exist.

MR. KHAWAJA: THE COURT: the method did exist. MR. KHAWAJA:

But the compound or the compound or

I'm not taking that position

because I don't think the patent is valid, but that's not here nor there. THE COURT: The patent is not valid. The U.S. dw

14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 indeed -THE COURT: What about this part that the patent -ProceedingsPatent Office issued it. MR. KHAWAJA: Fifty percent of patents that get

issued are invalid and the patent office challenges them and the contract -THE COURT: challenged? MR. KHAWAJA: Well, I can tell you that if Do we know if this patent is being

has been published and its listed in the schedule? MR. KHAWAJA: That wasn't the patent. That was a

published application that was filed, and if you were to compare the actual issued patent to what was in the application they are different things and that's the way the patent office works. You submit an application. You

can submit one tomorrow for an Iphone. are going to get it. THE COURT: Right.

It doesn't mean you


There are people that are going to

oppose it and even after you get it there are going to be challenges to it and that's why this was a milestone provision and Pfizer wanted the security. This is really a

damages cap, Your Honor, because the way Pfizer uses we paid the license initially to cap the damages that they could ever get on infringement. If another one comes up we dw

15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 on. -Proceedingswill cover it but I do want to address your point on the pleading because let's get back to first principles what's before Your Honor. The published application is not what he's suing He is not suing on a published application. He's

suing on a May 12 -- May, 2012, patent at issue after the contract. Its not mentioned in the contract. With respect to Your Honor's comment about the affidavit, this is I believe Exhibit 9 to the Maza's affidavit. We still -- I think its pretty much undisputed

there's no allegation in the complaint that Pfizer is actually doing anything with this patent. I don't think

the word Pfizer infringe or Pfizer in use or Pfizer import or sell, market or develop that's not there. no textbook pleading of infringement. So there is

I don't even know

that the milestone says at least one valid claim the patent needs to be covered. thinks exist. So, there is a fundamental notice defect. With respect to Exhibit N this multiple dose study of patients with mild to moderate Alzheimer's disease, Pfizer doesn't dispute that they engaged in studies, but this is their affidavit this is the material he cites. The first line says this study has been I don't know which valid claims he

completed, and so this study that he's pointing to is over dw

16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingswhich is exactly what we point out in the pleadings that Ponezumab doesn't work for Alzheimer's. stopped using it. THE COURT: You know, its interesting when you That's why we

say that the drug itself or the compound itself doesn't work and you stop using it. still -MR. KHAWAJA: THE COURT: I agree its in the facts. That's so much -- that's

It becomes a factual assertion at

that point getting beyond -- the pleadings are very straightforward and very simple for me. Do I have enough

for them or at least for me to say they stated a cause of action or not and at this point we are getting -- -- the arguments I'm hearing from you is getting me further down away from the point that there is no stated cause of action and getting further down or closer to a point where it may be right for summary judgment because at this point you are making all these arguments and they are getting less away -- the way I look at stating a cause of action have they dotted all their I's and crossed their Ts. Did they

plead, for example, negligence, a duty, a breach of that duty, proximate cause. Have they done all those elements

and for the contract have they pleaded the contract, is there a breach. argument. dw You are getting more into the guts of the

17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -ProceedingsYou are taking every position you have taken that I heard from you today is opposed to -- is the opposite of what Plaintiff says. So that at that point I'm getting two

versions of an interpretation of a contract which goes further away from whether or not they stated a cause of action and more whether or not they even have one which is at that point subject to I don't know how these compounds work. Sure, science in college. I ran away from


So with all these compounds and how they work

and how the patent office works suffice it to say and then with the term it would infringe verses your argument that its an infringement the word would doesn't do anything. That's diametrically opposite to what Plaintiff is saying. Oh, no wait a minute. This milestone was put in place so

we get the payment and it covers any possibility and that's why it was written the way its written. MR. KHAWAJA: You know --

I understand, Your Honor, where we

are going and I will say that I think then I will just rest really. THE COURT: Don't go so fast. There is also the

second cause of action are for the breach of implied -MR. KHAWAJA: duplicative. These that's completely

I don't even think -- they try to replead it

in the Motion to Dismiss as some level and intent by Pfizer to shut down their business. If we are operating under the dw

18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingscontract there is no implied covenant of breach. THE COURT: That's simple enough there. I think that's simple, but I would


come back one first because I think what we would need and what we are really asking for we don't need to get on the merits, Your Honor, but we do need a game plan or some road map to how to litigate this case. What I don't have is the Defendant here is -real notice of what it is he's alleging. I don't know

what -- what I have done -- there is no allegation. THE COURT: You are in the position of every What are

single defendant that comes into my courtroom. the plaintiffs suing me for. I have no idea.

In terms of the roadmap, that's subject to the discovery phase. You will get at some point -- you will

make your demand for Bill of Particulars or if that's the case or you make all that all comes into play, is crystalized later on in terms of what exactly -- this is where we are sort of the infant stage of this case where he is just the Plaintiff has just made an assertion of breach of contract and, rightly so, you want to flesh out what exactly did we breach, how did we breach it in that regard so that the roadmap will be developed. If you are asking

for one right now, I can't give you one right now. MR. KHAWAJA: I think as a matter of contract dw

19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsinterpretation what we would like to know and if you think there is enough there, that's fine, but we would like to know if there is this infringement test or not. legal question. That's not a fact question. That's a

We think its

implicit on the milestone. discovery is needed.

It might short circuit what

We fundamentally think the pleading

is clear, the patent isn't there and there is no allegation of what we have done. If we can get some specificity on

that in the pre-answer stage that's appropriate. THE COURT: I will think about it.

Your answer? MR. SHAPIRO: handle on the issue. I think Your Honor has a very good

Few points whether the patent that

was issued is covered by the schedule and by the license, that's really straightforward. contract. Pfizer -THE COURT: agreement. The bottom line is you had this That's right in the

You guys are the owner of the product or the

method and you want to make sure you are going to get compensated for everything and you are going to write a contract that's going to cover all instances of maybe of potential use not just actual use but potential infringement. MR. SHAPIRO: Its not infringement. For them to

get -- the definition of license patent is a defined term dw

20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsin the agreement Section 1.10 and it says license patent means any U.S. and ex-U.S. patent and applications listed on Schedule One that claims having claims that encompass the Ponezumab, broader than that but certainly by definition Ponezumab and also international, you know, European patents and other patents, but it says patent applications listed included there and the patent that was issued in May of 2012 was issued upon one of the patent applications that's listed on Schedule One. Also, there is no question its part of the licensed patents that is subject to the patent Milestone Provision. The patent Milestone Provision is a

straightforward provision that was -- its intent is clear that when one of the -- when an actual patent in the United States is issued on one of -- providing one of the valid claims covering Ponezumab and broader than that but certainly covering Ponezumab, then an obligation is generated to make a THE COURT: milestone. Let's not get into the exact figure. I'm sorry, to make a milestone


payment and that payment is due within 30 days after the patent is issued. Pfizer. Its not conditioned on any conduct by

Its not conditioned on Pfizer's use of the patent.

Its not -- its not conditioned on Pfizer's success with Ponezumab. dw

21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 THE COURT: -ProceedingsLet me ask you this question in terms

of contract terms, these milestone agreements are they typical? MR. SHAPIRO: Its very standard, Your Honor, that

they have milestone provisions along the way during the process. They -THE COURT: You just never know as to what's

going to happen in the future and you want to make sure as the developer of this product or compound that you want to get -- you are going to get compensated later on down the road if something good happens. MR. SHAPIRO: Exactly. They are getting the

rights to the patent while the patent application is pending its worth more -THE COURT: Once it gets -Once the patent is issued, but The contract itself they


they've already got right now. say we stopped using it. stopped using it.

We did -- we were using it and we

Now that, Your Honor, is pointed out

that's in factual dispute as to whether we stopped using it or not but its also -- its not relevant to this milestone payment -THE COURT: their choice. Whether they use it or not that's

The bottom line is you're arguing this Once I get a patent for the compound dw

contract is clear.

22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -ProceedingsPonezumab that's at issue here it doesn't matter whether you use it or not, if its part the schedule that we talked about in this whole contract here guess what, the milestone payments trigger attorney. MR. SHAPIRO: THE COURT: Exactly, Your Honor.

That's the plain -- that's what the It doesn't matter what you do.

sense I get is very simple.

The other way, the other argument is from the other side saying no it does matter what I do. If I don't use it at

all, use it at all and its not even in ply inventory I don't have to pay the milestone which gets to the heart of the contract in terms of what does the contract actually stand for. MR. SHAPIRO: Right. Correct.

In that respect, the contract has built into it a termination provision and it says in two places and, in fact, the milestone section it may interpreted -- Section 7.5 I think it is it says the contract Pfizer may terminate at any time after cessation of activities related to the development, ba, ba, ba, on 60 days notice, but they never gave that notice and in Section -- the Mile Stone Provision Section 3.1.3 -- 3.1.3C says for the avoidance of doubt if any milestone payment that comes -- it doesn't say it. says specifically milestone payment 3.1.3A that's the patent milestone, U.S. patent milestone, is payable if you dw It

23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 that. THE COURT: That sort of sense -- strikes me of has it. -Proceedingsterminate, yet then you have to pay it and even after you terminate if it came due during the time before you terminated, its owed. Its an obligation.

I don't know if Your Honor -- I think Your Honor I don't know if we need to go there in terms of

the construction of the contract -THE COURT: No. I think what was the intent of the


parties at the time and I think we put in I show that this is a phoney artificial claim they are making -THE COURT: Its an interesting argument because

it gets into a lot of what ifs and but suffice to say I'm more persuaded by your argument with respect to the first cause of action, but the second cause of action for breach of implied covenant to me when I looked at it, first of all, its only three paragraphs long. Thank goodness. MR. SHAPIRO: I did not spend a lot of time on It wasn't very long.

you are really upset and annoyed by the Defendants and I want to throw something at you. MR. SHAPIRO: That's true. Its alleged this is

not merely a breach but they are acting in bad faith and I think their motion is reflective of that bad faith, dw

24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsparticularly when you look at the negotiation process and the drafting process that I did put in on this motion and that's why I put it in, Your Honor, and then I amplified what we mean by the bad faith allegation in Mr. Maza's. THE COURT: Something like that in terms of bad

faith is such, you know, on this record it sounds I know you had this there was an argument here about the European dispute that's going on and you believe that there may be some sort of untoward, you know, shifting of the powers within the pharmaceutical industry putting your client sort of behind the eight ball. You know, I saw that but, you

know, for me to agree with you and say this is at this point pleaded sufficiently, a bad faith element, I'm not sure its there, but having said that, as you go through discovery once you start doing depositions and you get some more fire power, some more ammunition as they say, suffice it to say there is always the opportunity to amend the complaint and assert another claim, but at this point I don't believe that the second cause of action is -- its more duplicative of the first cause of action and less in the sense standing on its own independently of the first. You have a straightforward breach of contract and within the contract itself there is, you know, there is always an implied covenant good faith and fair dealing and there should be no, you know, untoward, I guess, breach of dw

25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 that covenant. MR. SHAPIRO: THE COURT: Exactly. -Proceedings-

-- terms of executing the contract. What I tried to bring out in Mr.


Maza's affidavit what happens was subsequent to the entry of this contract with this license, Pfizer acquired another company that had a competing product that has been the subject of the patent litigation in -THE COURT: That's the European? That's in Europe and sort of now


riding -- it started at the time that this, at least as of the time that the patent, the U.S. patent milestone came due it was that was a potential blockbuster and it was ahead of Ponezumab and they decided let's try to harm. That's the allegation. THE COURT: That's the allegation. And there is some, you know,

MR. SHAPIRO: reason to believe that. THE COURT:

I heard the arguments here.

This is

my decision and order with respect to the Motion to Dismiss. I'm going to that branch of the Motion to Dismiss the first cause of action is denied. Based on the

arguments I have heard here today, its less about whether or not the Plaintiff has stated a cause of action and more dw

26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -Proceedingsabout whether or not they have a valid claim. Hearing the arguments, its clear from me that the two parties are taking different positions on the interpretation of the contract, specifically whether or not the compound or the drug or the component at issue is covered under the contract that is in fact subject to a milestone payment. There are sharp differences on that interpretation of the contract that convinces me its less of a stated cause of action and more right for Summary Judgment Motion later on in terms of interpreting the contract and whether or not there is even an ambiguity. That's going to be later on to be fleshed out by the attorneys as we go along in this case. With respect to that branch of the motion to dismiss the second cause of action for breach of implied duty of good faith, I'm going to grant that motion and dismiss the second cause of action. I find the second cause of action is duplicative of the first cause of action. Dismissing that second cause

of action is without prejudice, subject to further discovery later on if the Plaintiff does in fact acquire information or evidence that will support such a claim or any other claim they are free to make a Motion to Amend the complaint and assert additional claims in that regard. dw

27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 dw -Decision/OrderSo, that's my decision and order. cause of action remains. The first

The second cause of action is That's my decision and order. Please order

dismissed without prejudice.

Counsel, you are the moving party. a transcript.

I will so order it and it you will have it

for the records. I guess you need to serve an answer to the complaint. Today is January 8. Why don't we give you

until February 7 to serve an answer to the complaint. I don't know if you want to talk to my law clerk in the meantime to maybe start the discovery schedule. MR. KHAWAJA: Sure. I would anticipate filing

some type of early summary judgment motion. THE COURT: be its -- okay. That's absolutely fine. That would

That's good to do that.

Thanks very much. * * *