HUMETRIX, INC., V. GEMPLUS S.C.A. 268 F.3d 910 (9th Cir. 2001) CASE BRIEF

HUMETRIX, INC., V. GEMPLUS S.C.A.

268 F.3d 910 (9th Cir. 2001)

NATURE OF THE CASE: This was an appeal from an award of damages for lost future profits related to a new venture.

FACTS: Humetrix, Inc.(P) contracted with Gemplus S.C.A. (D) to provide portable patient data storage solutions to the United States health care market. It all started when D spoke at a U.S. meeting over applications of smart cards to health care. D had no presence to speak of in the United States. P and D began negotiations that spanned a year. Initially both parties envisioned P only as a U.S. reseller of D's Smart Card products because D already had a U.S. subsidiary, Gemplus Card International Corp.

('Gemplus USA'). P negotiated an Agency Agreement with Gemplus USA. D became impressed with P's ingenuity and resourcefulness in exploiting those opportunities. The parties began to negotiate a new role quietly so as not to hurt Gemplus USA. D had come to the conclusion that Gemplus USA did not have the right initiative to market the concept and products. The parties were soon engaged in partnership and collaboration activities. A new agreement was drafted reflecting their 'partnership' and a new compensation scheme in which P was to keep the full margin of each unit sold in the United States. P drafted the agreement entitled the Representative Agreement and sent it to D to be signed but it was never signed. P was also directed to develop a name. P developed the name Vaccicard and registered it in the U.S. P labored industriously to capitalize on this opportunity, raising finances, increasing its sales staff, and developing a client base in the United States. Events at D were to sabotage those efforts. P had registered the trademark 'Vaccicard' in the United States. Guistini, a manager at Gemplus was a 45% shareholder in Inovaction S.A.R.L. ('Inovaction'), a French company that held the French trademarks 'Vaccicarte' and 'Vaccicard.' D also acquired a new U.S. subsidiary that could perform many of the functions that P was to have performed as D's American partner. D's cooperative efforts with P came to a grinding halt. For more than a month, D ignored P's requests to honor the parties' agreements. D eventually explained that, contrary to its prior representations, it viewed P not as its partner, but merely as a reseller. P had already invested significant time and resources in market research, client development, and product development, and had closed contracts with two California counties. P sued D for breach of contract and breach of its fiduciary duty as P's partner. P also sued Guistini for intentional interference with contractual relations and Inovaction seeking a declaration that P was entitled to use the 'Vaccicard' trademark in the United States. Since the Representative Agreement had never been signed P alleged that the discussions between P and D resulted in the formation of two oral contracts. D countered that the Agency Agreement constituted the sole agreement and moved to compel arbitration in accordance with the Agency Agreement's mandatory arbitration clause. The district court denied D's motion. We affirmed in that only Gemplus USA and P were parties to the Agency Agreement. The jury awarded P $15 million in damages for breach of contract and breach of fiduciary duty. The jury also declared that P was entitled to use the trademark 'Vaccicard' in the U.S. market. D appealed.

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