Medsense, LLC v. University System of Maryland

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

(SOUTHERN DIVISION)

MEDSENSE, LLC, )

)

Plaintiff, )

)

v. ) Civil Case No.: GLS-18-3262

)

UNIVERSITY SYSTEM OF MARYLAND, )

et al., )

)

Defendants. )

__________________________________________)

MEMORANDUM OPINION

MedSense, LLC (“MedSense” or “Plaintiff”) brings this action against Defendants

University System of Maryland, University of Maryland, College Park, Miao Yu, and Hyung Dae

Bae (collectively, the “Defendants”). (ECF No. 25). In essence, Plaintiff alleges that: (a) the

University System of Maryland (“USM”) and University of Maryland, College Park (“UMD”)

breached an exclusive licensing agreement related to certain intellectual property (“IP”) by failing

to disclose authored publications to MedSense; and (b) Defendants Yu and Bae, the authors of

those publications, disclosed trade secrets and confidential information. (Id.).

Pending before this Court is Defendants’ “Motion to Dismiss Plaintiff’s First Amended

Complaint or, in the Alternative, for Summary Judgment,” which Plaintiff opposes. The issues

have been fully briefed. ECF Nos. 29, 30 and 32, and this Court finds that no hearing is necessary.

See Local Rule (L.R.) 105.6. For the reasons set forth more fully below, Defendant’s motion is

GRANTED.

I. FACTUAL BACKGROUND1

MedSense is a limited liability corporation organized under the laws of the State of

Delaware, with a principal place of business in Irvine, California. (ECF No. 25, ¶ 3). The company

engages in the design and manufacture of miniature fiber optic pressure and temperature sensors

and sensor-based systems, as well as those related to medical or industrial application. (Id.). USM

is body corporate and politic composed of constituent organizations. (Id., ¶ 4). UMD is a higher

learning institution and constituent organization of USM. (Id., ¶ 5). Miao Yu, Ph.D., is a Maryland

resident and UMD professor of mechanical engineering and research scientist. (Id., ¶ 6). Hyung

Dae Bae, Ph.D., is a Maryland resident and former UMD professor of mechanical engineering and

research scientist. (Id., ¶ 7). Dr. Bae currently is a professor at Howard University. (Id.).

On or about March 15, 2010, MedSense and UMD entered into an “Exclusive Licensing

Agreement” (“2010 Licensing Agreement”). (ECF No. 25, ¶ 15). The 2010 Licensing Agreement

granted Plaintiff a worldwide, exclusive right and license for certain IP, and patent rights to make

and sell certain products, services, and processes concerning PS-2009-085 “Surface Mountable

Ultra-Miniature Fiber Optic Pressure Sensor” (“PS-2009-085”). (Id. ¶¶ 15, 20). The sensor

technology had been developed by Defendants Yu and Bae, who MedSense had engaged to further

assist with working on a “proof of concept” or prototype. (Id., ¶¶ 25-26).

In or about April 2012, MedSense and UMD agreed to amend the 2010 Licensing

Agreement. In addition, in May and July 2012, the 2010 Licensing Agreement was further

amended, providing Plaintiff with exclusive license to inventions IS-2012-047 “Optical

Interrogation Program for Fiber-Optic Pressure Sensors Based on LabVIEW (“IS-2012-047”) and

1 Unless otherwise noted, the facts are taken from the Amended Complaint, ECF No. 25, and are construed

in the light most favorable to the non-moving party, Plaintiff. This Court assumes the facts to be true. Aziz v. Alcolac,

658 F.3d 388, 390 (4th Cir. 2011); Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009).

PS-2012-061 “Smart Multifunctional Optical System-on-a-Chip Sensor Platform and Optical

Wireless Sensor Network Node” (“PS-2012-061”). (Id. ¶¶ 19-20). The remaining terms of the

2010 Licensing Agreement remained the same.

In or about July 2013, the parties entered into an amended and superseding Exclusive

Licensing Agreement (“2013 Licensing Agreement”), whereby Plaintiff agreed to provide an

increased royalty payment to UMD and to provide equity stakes in MedSense to UMD, Yu, and

Bae, as well as other individuals, in exchange for their existing and future work in developing the

licensed technology. (Id., ¶ 31). The 2013 Licensing Agreement continued to govern the patent

and licensing rights related to PS-2009-085, IS-2012-047, and PS-2012-061, as well as PS-2015-

080. (ECF No. 25, ¶¶ 19, 75).

TEDCO Phase I & III Grants

In or about August 2013 the Maryland Technology Economic Development Corporation

(“TEDCO”) awarded MedSense a $100,000 grant to facilitate the development of a working proof

of concept related to the licensed IP. (Id., ¶ 34). According to Plaintiff, Defendant Yu led the

efforts of the Phase I Grant and was involved in sensor design, modeling, and management of the

project (Id.). Defendant Bae oversaw sensor development, fabrication and evaluation. (Id.).

Thereafter, in or around March 13, 2014, Plaintiff was granted an additional $100,000 through a

TEDCO Phase III Grant, which was used to fund a batch fabrication process of first generation

optic sensors, a project led by Defendants Yu and Bae. (Id., ¶ 42).

MIPS Grant

On or about August 1, 2014, Plaintiff and UMD entered into Maryland Industrial

Partnership Agreement No. 5430 (“MIPS Agreement”) to facilitate additional funding toward

further developing the licensed technology. (Id., ¶ 36). As a partner, Plaintiff contributed $10,000

in cash to UMD and an additional $35,000 as an “in-kind contribution.”2 (Id.). Contained within

the MIPS Agreement was a clause permitting UMD to publish papers or make public presentations

regarding the underlying project, but subject to providing MedSense with a copy of such

publication or presentation 30-days prior to the date of submission for MedSense’s review of any

company-owned confidential information. (ECF No. 25, ¶ 38). In addition, the MIPS Agreement

contained a section that told each party that it had a duty to prevent the disclosure to third parties

of confidential information belonging to the other party, and also told each party to not use

confidential information for any other purpose not contemplated by the project and without consent

of the other party. (Id.).

Publications

Beginning in or about June 2012 until about June 2016, Defendants Yu and Bae published

a series of articles allegedly relating to their work during the time that they were involved with

MedSense. In a June 2012 article in Optics Express, Vol. 20, No. 13 entitled “Hybrid Miniature

Fabry-Perot Pressure Sensor Created Using UV-molding Process with Optical Fiber based Mold,”

Defendants Yu and Bae described the polymer fiber optic sensor and design manufacturing

process. (Id., ¶ 44). On or about September 23, 2013, Defendants Yu and Bae, as well as another

individual, published an article in Optics Express, Vol. 21, No. 19, entitled “MEMS Fabry-Perot

Sensor Interrogated by Optical System-on-a-Chip for Simultaneous Pressure and Temperature

Sensing,” which purportedly described optical system-on-a-chip interrogator for pressure and

temperature sensing. (Id., ¶ 48).

2 Although a partnership, the MIPS Agreement instructed that any intellectual property developed solely by

one party would belong to that party while any intellectually property jointly developed would be jointly owned. (ECF

No. 25, ¶ 39).

In or around April 2014, Defendants Yu and Bae published an article in the Journal of

Lightwave Technology entitled “Hybrid Miniature Fabry-Perot Sensor with Dual Optical Cavities

for Simultaneous Pressure and Temperature [M]easurements,” which purportedly described the

drawback of an all polymer miniature fiber optic pressure sensor. (Id., ¶ 45). Thereafter, in 2015,

Defendants Yu and Bae published an article in Optics Express entitled “On-Fiber Plasmonic

Interferometer for Multi-Parameter-Sensing.” (Id., ¶ 54).

In or about June 27, 2016, Defendants Yu and Bae published an article in Optics Express,

Vol. 24, No. 17, entitled “Low cost, high performance white-light fiber-optic hydroponic system

with a trackable working point,” with co-authors employed by Tianjin University. (Id., ¶ 57). This

article described how Fabry-Perot hydrophones suffer from working point drift and the method to

correct the issue. (Id.).

II. PROCEDURAL BACKGROUND

On October 22, 2018, MedSense filed this case in this Court. (ECF No. 1). On January 4,

2019, MedSense filed an Amended Complaint, first asserting that Defendant UMD allowed

Defendants Yu and Bae to publish five articles that disclosed MedSense’s trade secrets without its

permission, and in violation of its exclusive rights to the IP under the terms of the 2013 Licensing

Agreement. (ECF No. 25, Count 1, breach of contract). Second, according to MedSense,

Defendants’ actions deprived it of its right to protect from China its trade secrets and its interests

in the exclusively licensed IP through publications. (Id., Counts 6 & 7, misappropriation of federal

and state trade secret laws). Third, MedSense avers that the Defendants made misrepresentations

regarding the viability of the IP and what they would do to promote it, in order to induce MedSense

into the 2010 & 2013 Licensing Agreements, the MIPS Agreement, the TAPS Licensing

Agreement, among others. (Id., Counts 2 – 4, state tort claims). Fourth, MedSense alleges that

Defendants’ actions unjustly enriched them. (Id., Count 8, unjust enrichment). MedSense further

contends that Defendants Yu and Bae tortuously interfered with the 2013 Licensing Agreement.

(Id., Count 9, tortious interference with contract). Finally, Plaintiff requests a declaratory

judgment against all Defendants pursuant to 28 U.S.C. §§ 2201 et seq. (Id., Count 5). Count 1 is

solely against USM and UMD, whereas Count 9 is solely against Defendants Yu and Bae in their

official and individual capacities. (Id.). Counts 2-8 are against all Defendants. (Id.).

III. STANDARDS OF REVIEW

A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

Pursuant to Federal Rules of Civil Procedure (“Fed. R. Civ. P.”) 12(b)(1), a party may

move to dismiss a complaint for lack of subject matter jurisdiction. A Rule 12(b)(1) motion may

allege that sovereign immunity serves to be a jurisdictional bar against the claim. Cunningham v.

Gen. Dynamics Info. Tech., Inc., 888 F.3d 640, 649 (4th Cir. 2018). When a defendant challenges

subject matter jurisdiction, plaintiff bears the burden of establishing that subject matter jurisdiction

exists. See Evans v. B.F. Perkins Co.. 166 F.3d 642, 647 (4th Cir. 1999).

A Rule 12(b)(1) challenge to subject matter jurisdiction may proceed “in one of two ways”:

(1) by mounting either a facial challenge, asserting that the allegations pleaded in the complaint

are insufficient to establish subject matter jurisdiction; or (2) a factual challenge, asserting “‘that

the jurisdictional allegations of the complaint [are] not true.’” Kerns v. United States, 585 F.3d

187, 192 (4th Cir. 2009) (citation omitted)(alteration in original). In a facial challenge, “the facts

alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges

sufficient facts to invoke subject matter jurisdiction.” Kerns, 585 F.3d at 192. In a factual

challenge, however, a “district court is entitled to decide disputed issues of fact with respect to

subject matter jurisdiction.” Id. Under this scenario, a district court may regard the pleadings as

mere evidence on the issue and may consider evidence outside the pleadings without converting

the proceeding to one for summary judgment.” Velasco v. Gov’t of Indonesia, 370 F.3d 392, 398

(4th Cir. 2004).

If a district court finds that subject matter jurisdiction is lacking, then the complaint must

be dismissed. Cunningham, 888 F.3d at 649.

B. Motion to Dismiss for Failure to State a Claim

When a defendant files a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), it is

asserting that, even if you construe the facts advanced in the Plaintiff’s complaint as true, that

complaint fails to state a claim upon which relief can be granted. To survive a motion to dismiss,

then, a complaint must contain sufficient facts, and must state a “plausible claim for relief.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Fed. R. Civ. P. 8(a); Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 556 (2007) (complaint must set forth enough facts as to suggest a

“cognizable cause of action”). A claim “has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Iqbal, 556 U.S. at 678. The purpose of Rule 12(b)(6) “‘is to test the

sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim,

or the applicability of defenses.’” Velencia v. Drezhlo, No. RDB-12-237, 2012 WL 6562764, at

*4 (D.Md. Dec. 13, 2012) (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir.

2006)).

In general, when a motion is filed pursuant to Fed. R. Civ. P. 12(b)(6), a court cannot

consider documents outside of the pleadings to resolve factual disputes. Bosiger v. U.S. Airways,

510 F.3d 442, 450 (4th Cir. 2007). However, a court may consider documents “attached or

incorporated into the complaint,” as well as documents attached to a motion to dismiss, “so long

as they are integral to the complaint,” Philips v. Pitt Cnty. Memorial Hosp., 572 F.3d 176, 180 (4th

Cir. 2009), “and if the plaintiffs do not challenge its authenticity.” Pasternak & Fidis P.C. v. Recall

Total Info. Mgmt., Inc., 95 F.Supp.3d 886, 894 (D.Md. 2015).

C. Converting a Motion to Dismiss to a Summary Judgment Motion

When a motion is captioned as a motion to dismiss, or alternatively, as a motion for

summary judgment, it implicates the Court’s discretion under Fed. R. Civ. 12(d) to consider facts

outside of the pleadings, including affidavits, declarations or deposition transcripts. See Kelly v.

Lease, No. RDB-16-3294, 2017 WL 2377795, at *1 (D.Md. May 31, 2017). Depending on how a

court considers matters outside of the pleadings, a motion to dismiss may be treated as one for

summary judgment, and all parties must be given a reasonable opportunity to present evidence.

Put another way, under Rule 12(d), a court has “‘complete discretion to determine whether

or not to accept the submission of any material beyond the pleadings that is offered in conjunction

with a Rule 12(b)(6) motion and rely on it, thereby converting the motion, or to reject it, or simply

not consider it.’” Sager v. Hous. Comm’n, 855 F.Supp. 2d 524, 542 (D.Md. 2012) (quoting 5C

Charles Alan Wright et al., Federal Practice & Procedure §1366, at 159 (3d ed. 2004, 2011

Supp.)). In general, a district court is guided by whether considering the extraneous material is

“likely to facilitate the disposition of the action,” and “whether discovery prior to the utilization of

the summary judgment procedure is necessary.” Id.

IV. Discussion

Defendants advance several arguments in support of dismissing the Amended Complaint.

(ECF 29-1). First, that all claims against USM and UMD are barred by the Eleventh Amendment

to the United States Constitution. Second, that all state law claims against USM and UMD are also

barred by the State sovereign immunity doctrine. Third, Defendants Yu and Bae argue that all

claims against them are barred by the Eleventh Amendment and the state sovereign immunity

doctrine. Fourth, Defendants allege that all claims are barred pursuant to the January 2017 Mutual

Release and Covenant Not to Sue. Fifth, all state law claims against all Defendants are precluded

because the statute of limitations for filing suit has expired. Sixth, that Counts 2-4 should be

dismissed because they lack the requisite particularity of pleading required by Fed. R. Civ. P. 9(b).

Finally, as to Counts 6 & 7, Defendants contend those claims should be dismissed because

MedSense fails to state claims upon which relief can be granted. (Id.). The Court will first proceed

on the jurisdictional issue of whether Eleventh Amendment immunity protects USM and/or UMD

from suit in this Court.

A. Immunity – USM and UMD

1. Eleventh Amendment Immunity

Defendants USM and UMD contend that they are immune from suit in federal court under

the Eleventh Amendment. Thus, this Court lacks subject matter jurisdiction pursuant to Fed. R.

Civ. P. 12(b)(1). (ECF No. 29-1, pp. 7-8).

The Eleventh Amendment provides that the “Judicial power of the United States shall not

be construed to extend to any suit in law or equity, commenced or prosecuted against one of the

United States by Citizens of another state, or by Citizens or Subjects of any Foreign State.” U.S.

CONST., amend. XI. The Supreme Court has interpreted the Eleventh Amendment to stand for the

proposition that the “Constitution does not provide for federal jurisdiction over suits against

nonconsenting States.” Kimel v. Florida Bd. of Regents, 528 U.S. 62, 73 (2000); Seminole Tribe

of Fla. v. Florida, 517 U.S. 44, 54 (1996). In other words, the Eleventh Amendment bars

individuals and corporations from bringing suit against a state in federal court to recover damages,

unless an exception to sovereign immunity applies. Virginia Office for Prot. & Advocacy v.

Stewart, 563 U.S. 247, 253-54 (2011); Seminole Tribe, 517 U.S. at 54-55.

Sovereign immunity also bars suit against an instrumentality of the state, an “arm of the

state,” absent an explicit waiver or congressional abrogation of sovereign immunity. Seminole

Tribe, 517 U.S. at 54-55. This immunity extends to “state agencies and state officers acting in

their official capacities.” Cromer v. Brown, 88 F.3d 1315, 1332 (4th Cir. 1996).

Here, in establishing USM, the Maryland legislature specifically defined it as an

“instrumentality of the State,” governing “constituent institutions” of higher education. Md. Code

Ann., Educ. §§ 12-104, 12-101(b)(6). UMD is listed as one of those “constituent institutions” of

higher education. Md. Code Ann. Educ. § 12-101(b)(6)(i); see also Brownscombe v. Dep’t of

Campus Parking, 203 F.Supp.2d 479, 483 (D.Md. 2002)(recognizing the University System of

Maryland and University of Maryland as the “same legal entity,” based on state law).3 See also

Maryland Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 265 (4th Cir. 2005) (recognizing

USM as an “alter ego of Maryland.”); Palotai v. Univ.of Maryland College Park, 959 F.Supp. 714,

716 (D. Md. 1997) (“The University of Maryland is . . . ‘an arm of the State partaking of the State’s

Eleventh Amendment immunity.’” (quoting Bickley v. Univ. of Maryland, 527 F.Supp. 174, 181

(D.Md. 1981)). Here, as State entities, Defendants USM and UMD are entitled to sovereign

immunity under the Eleventh Amendment.

Plaintiff does not disagree that the Eleventh Amendment provides immunity to USM or

UMD from suit in federal court. Rather, Plaintiff avers that USM and UMD have waived immunity

3 Utilizing the point that USM and UMD are recognized as the same legal entity, Defendants request that this

Court dismiss USM from this action because Plaintiff’s claims are against UMD rather than USM. (ECF No. 29-1, p.

8). As set forth more fully below, because this Court finds that Eleventh Amendment immunity exists to bar suit

against USM and UMD, dismissal of this case is warranted. However, this Court need not address whether the claims

against USM should be dismissed without prejudice.

by assenting to be sued through Section 13.08 of the 2013 Licensing Agreement. (ECF No. 30-1,

pp. 11-19).

The Fourth Circuit has noted that there are three exceptions to the Eleventh Amendment’s

bar of suits against a state or its arm: abrogation, prospective injunctive relief against state officials

acting in violation of federal law4, and waiver by the state or its arm. Lee-Thomas v. Prince

George’s Cnty. Pub. Sch., 666 F.3d 244 (4th Cir. 2012); see also Bd. of Trustees of Univ. of

Alabama v. Garrett, 531 U.S. 356, 363 (2001); Lapides v. Bd. of Regents of Univ. Sys. Of Georgia,

535 U.S. 613, 618 (2002). In the instant case, only two of the noted three exceptions potentially

apply: abrogation and waiver.

A. Abrogation

MedSense raises a claim under a federal statute, the Defense of Trade Secrets Act

(“DTSA”). Thus, the Court’s inquiry first begins with whether Congress’ enactment of the DTSA

abrogates Maryland’s Eleventh Amendment immunity.

Congress can abrogate a state’s Eleventh Amendment immunity pursuant to a valid grant

of constitutional authority. Garrett, 531 U.S. at 363. To determine whether Congress has, in fact,

abrogated a state’s sovereign immunity, “we ask two questions: first, whether Congress has

‘unequivocally expresse[d] its intent to abrogate the immunity,’. . . and second, whether Congress

has acted ‘pursuant to a valid exercise of power.’” Seminole Tribe of Florida, 517 U.S. at 55

(quoting Green v. Mansour, 474 U.S. 64, 68 (1985)).

4 This exception is known as the Ex parte Young doctrine, which “ensures that state officials do not employ

the Eleventh Amendment as a means of avoiding compliance with federal law.” Puerto Rico Aqueduct and Sewer

Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993). Ex parte Young doctrine is viewed as a “narrow one” and is

only applicable where a party seeks prospective relief. Id. This doctrine, however, “does not permit judgments against

state officers declaring that they violated state law in the past” nor, as here, does it have “application in suits against

the States and their agencies.” Id. Accordingly, the Defendants are correct that the Ex Parte Young doctrine is not

applicable in the instant case.

In 2016, Congress passed the DTSA, providing that “[a]n owner of a trade secret that is

misappropriated may bring a civil action . . . if the trade secret is related to a product or service

used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1); See P.L.

114-153 (May 11, 2016). In enacting the law, Congress provided some limitation to the

applicability of the law by expressing that the DTSA “does not prohibit or create a private right of

action” with regard to “any otherwise lawful activity conducted by a governmental entity . . . of a

State.” 18 U.S.C. § 1833(a)(1). Congress granted the United States district courts original

jurisdiction over civil actions arising under the statute. See 18 U.S.C. § 1836(c).

To date, there do not appear to be any reported cases from this Circuit that address the

application of the DTSA to a state or its instrumentalities, nor does there appear to be any reported

cases dispositive of the issue as to whether Congress has abrogated a State’s Eleventh Amendment

immunity through enactment of the DTSA. Defendants rely on Fast Enterprises, LLC v. Pollack,

for support of their proposition that Congress did not abrogate States’ Eleventh Amendment

immunity. Civ.A. No. 16-cv-12149-ADB, 2018 WL 4539685, at *4 (D.Mass. Sept. 21, 2018).

However, Fast Enterprises is distinguishable from the facts presented in instant case. Specifically,

the district court had to determine whether the CEO/Secretary of the Massachusetts Department

of Transportation’s misappropriated confidential information in violation of the DTSA by

releasing information contained in a bid proposal that was subject to a public information request.

Id. at *1. Competing against the DTSA was Massachusetts’ public records statute requiring the

disclosure of those bid proposal documents upon request. Id. The district court found that, because

the CEO/Secretary was complying with Massachusetts law, even if it conflicted with DTSA, the

court could not otherwise find that CEO/Secretary engaged in “unlawful activity.” Id. at *4.

Here, as alleged, Defendants’ actions of releasing confidential information through

publication of researched matters is factually dissimilar. Nevertheless, a review of the DTSA does

not indicate that it was Congress’ intent to abrogate a state’s Eleventh Amendment immunity by

permitting a private party to bring forth a civil suit in federal court. Although Section 1836(c)

provides original jurisdiction to a district court, the statute is silent as to which parties can be sued

in federal court. Because the Supreme Court instructs that “Congress’ intent to abrogate the

States’ immunity from suit must be obvious from a clear legislative statement,” the authorization

of a civil action in a federal court cannot be read to mean that this language alone constitutes

“statutory language sufficient to abrogate the Eleventh Amendment” by permitting suit against a

State or its entities. Seminole Tribe of Florida, 517 U.S. at 55-56 (internal quotations omitted).

Accordingly, this Court agrees with Defendants that the DTSA does not abrogate the State’s

Eleventh Amendment immunity afforded to USM and UMD.5

B. Waiver

A state, or its instrumentality, may waive its Eleventh Amendment sovereign immunity

and be sued in federal court. Lapides, 535 U.S. at 618; Lee-Thomas, 666 F.3d at 249. However,

the “test for determining whether a [s]tate has waived its immunity from federal-court jurisdiction

is a stringent one.” Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241 (1985), superseded by

statute, P.L. 99-506, as recognized in Lane v. Pena, 518 U.S. 187 (1996). A court may find that a

state has waived its Eleventh Amendment immunity in one of two ways: (1) a state makes a “‘clear

distinction’ that it intends to submit itself to [federal] jurisdiction”; or (2) a state voluntarily

5 Defendants also aver that Plaintiff’s DTSA claim fails because the law was enacted following the alleged

misappropriations of trade secrets prior to 2016. (ECF No. 29-1, pp. 27-28). Because the Court finds that Congress

did not intend to abrogate a state’s Eleventh Amendment immunity, and Plaintiff’s claim against USM and UMD

cannot stand in this Court, this Court need not further address Defendants’ substantive argument that Plaintiff’s claims

pre-date the enactment of the DTSA.

invokes federal jurisdiction. College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense

Bd., 527 U.S. 666, 675-76 (1999) (quoting Great N. Life Ins. Co. v. Read, 322 U.S. 47, 54 (1944));

see also, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 99 (1984)(explaining a state’s

consent to suit must be “unequivocally expressed.”).

1. Express Waiver

“[A] state’s highest court is entitled to say what that state’s law is on the question of consent

to suit in a federal court.” Lee-Thomas, 666 F.3d at 252 (citing Palmer v. Ohio, 248 U.S. 32, 34

(1918)). Maryland’s highest court, the Court of Appeals, has instructed that “any waiver of [the

State’s] immunity must come from the [l]egislature.” State v. Sharafeldin, 382 Md. 129, 140, 854

A.2d 1208, 1214 (Md. 2004). Under this construct, “[s]tate agencies may not, on their own, waive

sovereign immunity ‘either affirmatively or by failure to plead it.’” Id. Regarding an express

waiver, i.e., consent, the Supreme Court has stated that this is present “only where stated by the

most express language of by such overwhelming implication from the text [that will] leave no

room for any other reasonable construction.” Atascadero State Hosp., 473 U.S. at 240 (internal

quotation marks and alteration omitted).

The Court of Appeals has explained that the Maryland legislature’s waiver of State

sovereign immunity related to claims arising out of contracts entered into by the State or its

employees, does not waive “‘the State’s Eleventh Amendment immunity in actions in federal court

or [] waive its inherent sovereign immunity in actions filed in the courts of some other State.’”

Sharafeldin, 854 A.2d at 1219 (quoting Dept’ of Natural Res. v. Welsh, 308 Md. 54, 59-60, 521

A.2d 313, 315-16 (Md. 1986)). Accordingly, a district court will “strictly construe” waiver

arguments in favor of the sovereign. Sossamon v. Texas, 563 U.S. 277, 285 (2011).

In opposing Defendants’ Motion to Dismiss, Plaintiff avers that the language contained in

the 2013 Licensing Agreement waived USM and UMD’s right to assert a sovereign immunity

defense. (ECF No. 30-1, p. 11). Defendants contend, however, that the “express contract language

provides that only one party, the LICENSEE (MedSense), consent[ed] to jurisdiction [of] this

federal court.” (ECF No. 29-1, 13). The issue is whether the language contained within the parties’

2013 Licensing Agreement acts as an express waiver, and therefore, USM and UMD acquiesced

to federal court jurisdiction.6 Section 13.08 of the 2013 Licensing Agreement states:

This Agreement and the inventorship and ownership of any inventions, patents,

products and other intellectual property rights relating to the subject matter(s) of

this Agreement shall be governed by and construed and enforced in accordance

with the laws of the State of Maryland and the United States of America.

LICENSEE consents to the exclusive jurisdiction and venue of the United States

District Court for the District of Maryland or, if federal jurisdiction is lacking, the

Circuit Court of the State of Maryland. LICENSEE further agrees to waive its right

to assert that either forum lacks personal jurisdiction over LICENSEE or is an

inconvenient forum for resolving the underlying dispute. (J.R. 027).

In this instance, the Court finds that UMD and USM, constituent entities of the State of

Maryland, have not expressly waived the State’s Eleventh Amendment immunity. A plain reading

of the 2013 Licensing Agreement demonstrates that “LICENSEE” only refers to MedSense.

Section 13.08 clearly states that it is the Licensee who is the party consenting to this Court’s

jurisdiction. See J.R. 027, “2013 Exclusive License Agreement.” The language within Section

13.08 does not expressly state that, as “LICENSOR,” e.g., USM or UMD, acquiesces to federal

6 Although Defendants challenge the Amended Complaint on Eleventh Amendment immunity grounds, the

disputed issue before this Court is whether USM and/or UMD waived this immunity privilege in the 2013 Licensing

Agreement. Where, as here, the parties are disputing facts associated with subject matter jurisdiction, a district court

is permitted to consider the pleadings as evidence and “may consider outside evidence” to assist in its determination.

Hyde v. Maryland State Bd. Of Dental Exam., No. ELH-16-2489, 2017 WL 2908998, *4 (D.Md. July 7, 2017). As

here, where the Plaintiff initially attached the 2013 Licensing Agreement to its Complaint, and the parties have also

submitted a Joint Record (“J.R.”) and, because the authenticity of this Agreement is not challenged by either party,

the “court may properly consider documents that are ‘explicitly incorporated into the complaint by reference to those

attached to the complaint as exhibits[.]’” Id. at *4 (quoting Goines v. Valley Cnty. Servs. Bd., 822 F.3d 159, 166 (4th

Cir. 2014)). Therefore, the Court will consider the 2013 Licensing Agreement for the limited purpose of deciding

whether USM and/or UMD assented to federal jurisdiction.

jurisdiction. Thus, this Court declines to construe Section 13.08 as containing an express waiver.

Because Plaintiff cannot direct this Court to any language in which USM or UMD provided a

“clear declaration” of a waiving the State’s sovereign immunity, this Court cannot agree that USM

or UMD have unequivocally expressed their consent to being sued in this Court. See College Sav.

Bank, 527 U.S. at 676 (noting waiver is absent even where a State merely states “its intention to

sue or be sued, . . . or even authorizing suits against it in any court of competent jurisdiction.”)

(internal quotations omitted).

Finally, MedSense’s reliance on three cases cited in its memorandum to support its

contention that USM and/or UMD waived its Eleventh Amendment immunity is misapplied. In

each of those cases, those courts were able to conclude that those States had waived their Eleventh

Amendment immunity either through express language contained within contractual agreements,

see Pettigrew v. Oklahoma ex rel. Oklahoma Dep’t of Pub. Safety, 722 F.3d 1209, 1215 (10th Cir.

2013) and Baum Research & Dev. Co. v. Univ. of Massachusetts at Lowell, 503 F.3d 1367, 1371

(Fed. Cir. 2007), or the state legislature(s) agreed to waive jurisdiction through statutory

provisions, see Port Authority Trans-Hudson Corp. v. Feeney, 495 U.S. 299, 307-309 (1990).

Neither factual scenario is present in the instant case. Therefore, the Court will next address

whether Defendants USM and UMD have waived immunity by voluntarily invoking jurisdiction.

2. Voluntary Action/Affirmative Conduct

Defendants next contend that they are involuntary parties to the underlying action, and

therefore, have not engaged in affirmative conduct to subject them to federal jurisdiction and

waiver of their Eleventh Amendment immunity. (ECF No. 29-1, p. 10). “[W]aiver by litigation .

. . ‘involve[s] actions in which the state acted as an affirmative participant rather than as a

beleaguered defendant.’” Beckham v. Nat’l R.R. Passenger Corp., 569 F.Supp.2d 542, 553 (D.Md.

2008)(quoting Unix Sys. Labs, Inc. v. Berkley Software Design, Inc., 832 F.Supp. 790, 801-02

(D.N.J. 1993)).

Here, Plaintiff has brought a claim against USM and UMD in federal court. It cannot argue

that either USM or UMD acted as an affirmative participant that voluntarily invoked federal

jurisdiction. Thus, this Court declines to find that USM and UMD waived the State of Maryland’s

immunity from suit. Indeed, the Supreme Court has held that a state entity named as a party in a

pending federal court action is viewed as an involuntary participant. See Lapides, 535 U.S. at 622.

Accordingly, it is insufficient to constitute as a waiver of the state’s Eleventh Amendment

immunity.

This Court, therefore, holds that based on the foregoing reasons, Defendants USM and

UMD have not waived their Eleventh Amendment immunity either through express language or

by affirmative conduct such that they are subject to federal court jurisdiction. Accordingly,

because the Eleventh Amendment bars Plaintiff from bringing forth suit against USM and UMD,

all of Plaintiff’s claims, Counts 1-8, must be dismissed without prejudice against USM and UMD.

See Palotai, 959 F.Supp. at 720.

2. State Statutory Immunity

Although this Court has ruled that Counts 1-8 against USM and UMD are to be dismissed,

this Court will also take a moment to address whether the State statutory immunity defense raised

by Defendants relating to Plaintiff’s state law claims, Counts 1-4 and 7-8, leads to a similar result.

Pursuant to the Maryland Tort Claims Act (“MTCA”), the State’s legislature has authorized

the limited waiver of the State’s sovereign immunity for it and its “units” as to tort claims brought

forth “in a court of the State.” Md. Code Ann., State Gov’t § 12-104(a) (emphasis added).

For claims originating from a contract, the legislature has instructed that, unless otherwise

provided, the “State, its officers, and its units may not raise the defense of sovereign immunity in

a contract action, in a court of the State, based on a written contract that an official or employee

executed for the State or 1 of its units while the official or employee was acting within the scope

of the authority of the official or employee.” Id., State Gov’t § 12-201(a). (emphasis added). The

Court of Appeals defined the term “in a court of the State” to mean a “court that is part of the

Maryland judiciary.” Sharafeldin, 382 Md. at 149, 854 A.2d at 1219; see Weller v. Dep’t of Soc.

Servs. for City of Baltimore, 901 F.2d 387, 397 (4th Cir. 1990) (MTCA “limits the state’s waiver

of immunity to actions brought in Maryland state courts.”). Although a state may waive its

sovereign immunity by statute to subject the state or its agencies to suit in the state’s own courts,

this “‘does not constitute a waiver by a state of its constitutional immunity under the Eleventh

Amendment from suit in federal court.’” Beckham, 569 F.Supp.2d at 550-51 (quoting Fla. Dep’t

Health & Rehab. Servs. v. Fla. Nursing Home Ass’n, 450 U.S. 147, 150 (1981) (per curiam)).

Defendants assert that Plaintiff should have filed its state contract and tort law claims in a

state court. (ECF No. 29-1, p. 15). This Court agrees. The law is clear that such claims should

be brought in a state court and Plaintiff’s state law claims against these state entities cannot survive

in federal court. See also, Palotai, 959 F.Supp. at 719-20 (explaining dismissal due to Eleventh

Amendment immunity precludes federal jurisdiction over pendent state law claims). Accordingly,

Plaintiff’s state contract and tort law claims must also be dismissed without prejudice.

B. Claims against Drs. Yu and Bae

1. Eleventh Amendment Immunity as State Employees

Defendants further contend that, because USM and UMD are entitled to Eleventh

Amendment immunity, Drs. Yu and Bae, as employees of UMD, are also entitled to the same

immunity. (ECF No. 29-1, p. 19). Specifically, Defendants aver that their actions were within the

scope of employment, which entitles them to Eleventh Amendment immunity. (Id.). Although

MedSense does not disagree that Eleventh Amendment immunity is applicable to Defendants Yu

and Bae, it argues that such immunity is waived because Defendants Yu and Bae “acted

maliciously, without just cause, illegally, or recklessly . . . [for] publishing no less than five articles

disclosing trade secrets.” (ECF No. 30-1, p. 26). Plaintiff further contends that Defendants Yu and

Bae acted in their “individual capacities” in publishing confidential evidence of MedSense and

“failing to maintain . . . [a] confidential relationship between equity interest holders and

MedSense.” (Id.).

As it concerns the application of a state’s Eleventh Amendment immunity to its employees,

the Fourth Circuit has held that a “suit against the state official acting in their official capacities is

a suit against the State.” Weller, 901 F.2d at 397-98. However, those same “officials may be sued

in their individual capacities.” Id. at 397. Thus, dismissal of claims against state officials acting

in their official capacities is proper. Gray v. Laws, 51 F.3d 426, 439 (4th Cir. 1995).

Plaintiff concedes in its memorandum that Defendants Yu and Bae were acting within their

scope of employment. See ECF No. 30-1, p. 26. Because this Court has already found that

Eleventh Amendment immunity bars MedSense’s claims against Defendants USM and UMD, this

Court also finds that such immunity is applicable to Defendants Yu and Bae for claims raised

against them for claims against them in their official capacity as employees of UMD. Even

construing MedSense’s allegations within its Amended Complaint as true, there do not appear to

be any reported cases from this Circuit standing for the proposition that if state employees acted

maliciously or with gross negligence that this vitiates the applicability of the State’s Eleventh

Amendment immunity. Therefore, MedSense’s claims against Defendants Yu and Bae in their

official capacity, Counts 2-9, must be dismissed without prejudice.

2. State Statutory Immunity for Employees

Similar to the immunity afforded state employees under the Eleventh Amendment is the

immunity afforded by the State to its employees. Maryland provides that state employees are

protected from liability by state sovereign immunity for tortious acts or omissions that are within

the scope of their employment, unless those actions were made with malice or gross negligence.

See Md. Code Ann., Cts. & Judic. Proc. § 5-522(b); State Gov’t § 12-105. Where a plaintiff

advances claims alleging malice, the complaint should contain “well-pled facts showing ‘ill-will’

or ‘evil or wrongful motive’” to be “sufficient to take a claim outside of immunity and non-liability

provisions of the MTCA.” Barbre v. Pope, 402 Md. 157, 935 A.2d 699, 714 (Md. 2007). “Malice”

is defined as “conduct characterized by evil or wrongful motive, intent to injure, knowing and

deliberate wrongdoing, ill-will or fraud.” Id. “Gross negligence” is defined as the “intentional

failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or

property of another, and also implies a thoughtless disregard of the consequences without the

exertion of any effort to avoid them,” and if said differently “a wrongdoer is guilty of gross

negligence or acts wantonly and willfully only when he inflicts injury intentionally or is so utterly

indifferent to the rights of others that he acts as if such rights did not exist.” Id. at 717.

Defendants aver that Plaintiff’s claims against Defendants Yu and Bae are also barred by

state statutory immunity. (ECF No. 29-1, pp. 19- 21). Specifically, Defendants contend that the

Amended Complaint is “devoid of any specific factual allegation that Drs. Yu and Bae were

grossly negligent or acted with malice,” such that their statutory immunity is vanquished. (Id., p.

19). MedSense counters that, inter alia, Defendants Yu and Bae withheld MIPS deliverables and

published more than five articles that disclosed its trade secrets both of which demonstrate that

Defendants Yu and Bae acted “maliciously, without just cause, illegally, or recklessly on multiple

occasions.” (ECF No. 30-1, p. 26). Moreover, MedSense asserts that, after receiving equity stakes

in the company, Defendant’s Yu and Bae each acted in their individual capacities by publishing

confidential information belonging to MedSense and that Yu and Bae failed to maintain

confidentiality. (Id.)

Here, in reviewing the allegations asserted in Plaintiff’s Amended Complaint, the Court is

unable to discern what actions Defendants Yu and Bae allegedly undertook that were outside the

scope of their employment. For example, the articles published by Defendants Yu and Bae were

during the time of their employment with UMD. However, Plaintiff’s Amended Complaint alleges

that those articles were published while they were engaged in working with MedSense and during

Defendant’s Yu’s and Bae’s employment with UMD.

Moreover, other than stating in its Amended Complaint that Defendants Yu and Bae acted

willfully or maliciously, Plaintiff has not set forth any facts demonstrating that those publications

were authored or published with malicious intent or motive sufficient to void Defendants’

immunity. See Barbre, 935 A.2d at 717 (viewing gross negligence as “something more than simple

negligence, and likely more akin to reckless conduct.”). Accordingly, without more, this Court is

unable to find that Defendants Yu or Bae acted outside the scope of their employment or that

Defendants acted with malice or gross negligence in their official capacity to void statutory

immunity.7

7 It should be noted that the State of Maryland’s immunity is not fully waived for tortious acts or omissions

made by its employees, including those made with malice or gross negligence. See Barbre, 402 Md. 157, 935 A.2d at

710; Md. Code Ann., Cts. & Jud. Proc. § 5-522. Accordingly, any claim related to actions done by Defendants Yu or

Bae with malice or gross negligence could not survive against USM or UMD.

Separately, because MedSense also raises the claims against Defendants Yu and Bae in

their individual capacity, this Court cannot apply the same analysis and conclude that they are

immune from suit in this capacity. See Weller, 901 F.2d at 398. However, as already articulated,

from this Court’s reading of Plaintiff’s Amended Complaint, it cannot discern what actions

Defendants Yu and Bae undertook outside the scope of their employment with UMD. Therefore,

at this juncture, those claims against Defendants Yu and Bae in their individual capacities, Counts

2-9, will also be dismissed without prejudice subject to MedSense further amending its Complaint

to articulate what actions Defendants Yu and Bae may have taken outside of the scope of their

employment. Because this Court will dispense with Plaintiff’s claims based on the aforementioned

grounds, this Court need not address the merits of Defendants’ substantive arguments on the

remaining issues.

V. Conclusion

For the foregoing reasons, Counts 1-8 against the University System of Maryland, the

University of Maryland, College Park, and Drs. Yu and Bae, in their official capacities as

employees of UMD, are DISMISSED WITHOUT PREJUDICE. Counts 2-9 against

Defendants Yu and Bae, in their individual capacities, are also DISMISSED WITHOUT

PREJUDICE.

Dated: September 27, 2019 /s/

The Honorable Gina L. Simms

United States Magistrate Judge