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Lawyers, other representatives, expert(s), tribunal’s secretary

Final Award

Glossary of Abbreviations

General

AAA American Arbitration Association
AAA Arbitration Rules Commercial Arbitration Rules of the AAA (2013)
Blue Sky Blue Sky BioServices, Worcester, Massachusetts
Business Plan Multi-Drug Resistant Organism Treatment Laser Business Plan, dated March 3, 2015 (Ex. R-1)
CA-MRSA Community-Acquired MRSA
CDC U.S. Centers for Disease Control and Prevention
Demand Letter Nomir's Demand Letter (Settlement Demand for Breaches of EAA), dated September 2, 2016 (Ex. C-7)
Draft Demand Letter Nomir's draft Demand Letter, dated August 3, 2016 (Ex. C-215B)
EAA Exclusive Alliance Agreement, dated November 21, 2014, (effective November 20, 2014) between SGI and Nomir (Ex. C-1)
ERI Edinburgh Royal Infirmary
FDA U.S. Food and Drug Administration
HA-MRSA Hospital-Acquired MRSA
HP1 The first human pilot study
HP2 The second human pilot study
IBA Rules International Bar Association Rules on the Taking of Evidence in International Arbitration (2010)
ICDR International Centre for Dispute Resolution
ICDR Arbitration Rules International Arbitration Rules of the ICDR (2014)
Lasertel Laster, Inc., a subsidiary of SGI
Leonardo Leonardo MW Ltd., SGI's parent company, a U.K. subsidiary of Leonardo S.p.A. and formerly known as Selex ES Ltd.
Leonardo S.p.A SGI's ultimate parent company (formerly Leonardo-Finmeccanica), an Italian global high-tech company focused on aerospace, defense and security
MDRO Multi-drug resistant organism
MDRO Project or Project SGI's and Nomir's project to develop and commercialize Nomir's laser technology for use in eradicating MDROs from patients' nostrils
MRSA Methicillin-resistant Staphylococcus aureus
MSSA Methicillin-sensitive Staphylococcus aureus
Nomir Nomir Medical Technologies, Inc., Respondent
Notice of Dispute Nomir's Notice of Dispute pursuant to the EAA, dated November 28, 2016 (Ex. C-6)
Notice of Termination Nomir's Notice of Termination pursuant to the EAA, dated March 17, 2017 (Ex. C-13)
Parexel Proposal A Preliminary Proposal for the Study Looking at Noveon Multi-Drug Resistant Organism Laser (MDRO Laser) for use in Ridding the Nares of MRSA Colonies to Reduce Surgical Site Infections by Parexel International, dated September 15, 2016 (Ex. C-282A)
Revised Parexel Proposal Revised Parexel Proposal, dated September 30, 2016 (Ex. C-283B)
REC South East Scotland Research and Ethics Committee
S. aureus or Staph Staphylococcus aureus
Selex SGI and its affiliates Lasertel, Leonardo and Leonardo S.p.A
SGI Selex Galileo, Inc., Claimant
Tr. (Oct. 17, 2019) Transcript of the Oral Argument on Claimant's Motion for Security for Costs, October 17, 2019
Tr. (Jan. __, 2020) Transcript of the Hearing on the Merits, January 20-24, 2020
UoE University of Edinburgh

 

Submissions

DFA SGI's Demand for Arbitration, dated May 26, 2017 (supplemented by SGI's Demand for Arbitration pleading, dated May 31, 2017)
CC&A Nomir’s Counterclaim and Answer, dated July 21, 2017
ACC SGI’s Answer to Counterclaim, dated September 14, 2017
SGI 1st Mem Claimant’s Opening Memorial, dated December 15, 2017
Nomir 1st Mem Respondent’s Counter-Memorial, dated March 15, 2018
SGI 2nd Mem Claimant’s Reply Memorial, dated September 9, 2018
Nomir 2nd Mem Nomir’s Rejoinder, dated December 2, 2018
SGI 3rd Mem Claimant’s Rejoinder to Counterclaim (corrected), dated May 31, 2019
SGI PHMem Claimant’s Post-Hearing Memorial, dated March 13, 2020
Nomir PHMem Respondent’s Post-Hearing Memorial, dated March 13, 2020
SGI Costs Submission Claimant’s Submission on Sanctions and Costs, dated April 3, 2020
Nomir Costs Submission Respondent’s Submission on Costs, dated April 3, 2020

 

Witnesses

Bornstein Testimony of Dr. Eric Bornstein: First Witness Statement, dated Mar. 15, 2018 ("WS1"); Second Witness Statement, dated Dec. 2, 2018 ("WS2")
Box Testimony of Andrew Box: First Witness Statement, dated Dec. 15, 2017 ("WS1"); Second Witness Statement, dated Sept. 7, 2018 ("WS2"); Third Witness Statement, dated May 31, 2019 ("WS3")
Creamer Testimony of Graeme Creamer: First Witness Statement, dated Dec. 15, 2017 ("WS1"); Second Witness Statement, dated Sept. 8, 2018 ("WS2"); Third Witness Statement, dated May 31, 2019 ("WS3")
Foreman Testimony of Christy Foreman (Expert): First Expert Report, dated Sept. 7, 2018 ("ER1"); Second Expert Report, dated May 31, 2019 ("ER2")
Glatt Testimony of Dr. Aaron Glatt (Expert): Expert Report, dated Dec. 2, 2018 ("ER")
Hamblin Testimony of Dr. Michael Hamblin (Expert): First Expert Report, dated Mar. 15, 2018 ("ER1"); Second Expert Report, dated Dec. 2, 2018 ("ER2")
Harvey Testimony of Dr. Brian E. Harvey (Expert): First Expert Report, dated Mar. 15, 2018 ("ER1"); Second Expert Report, dated Nov. 30, 2018 ("ER2")
Kay Testimony of Dr. Jack Kay: First Witness Statement, dated Mar. 15, 2018 ("WS1"); Second Witness Statement, dated Dec. 2, 2018 ("WS2")
Malackowski Testimony of James E. Malackowski (Expert): Expert Report, dated May 31, 2019 ("ER")
Rush Testimony of Garrett W. Rush (Expert): First Expert Report, dated Mar. 15, 2018 ("ER1"); Second Expert Report, dated Dec. 2, 2018 ("ER2")
Stamm Testimony of Laura B. Stamm (Expert): First Expert Report, dated Sept. 9, 2018 ("ER1"); Second Expert Report, dated May 31, 2019 ("ER2")
Wilcox & Brown Testimony of Dr. Mark Wilcox and Dr. Stanley Brown (Experts): First Expert Report, dated Sept. 7, 2018 ("ER1"); Second Expert Report, dated May 31, 2019 ("ER2")

 

I. THE PARTIES

1.
Claimant Selex Galileo, Inc. ("SGI" or "Claimant") is a Delaware corporation head-quartered in Arlington, Virgina. SGI is an indirect subsidiary of a global high-tech company headquartered in Italy now known as Leonardo S.p.A. (formerly known as Leonardo-Finmeccanica) that specializes in aerospace, defense and security. SGI's direct parent is Leonardo MW Ltd. ("Leonardo"), also a subsidiary of Leonardo S.p.A, which is organized and operates in the United Kingdom across a number of locations, with the main place of business in relation to the project at issue in this arbitration in Edinburgh, Scotland.1
2.
Claimant's contact information is:

Selex Galileo, Inc.
2345 Crystal Drive, Suite 901
Arlington, VA 22202

3.
Respondent Nomir Medical Technologies, Inc. ("Nomir" or "Respondent") is a Delaware Corporation. Nomir is a medical device company co-founded in 2003 by Eric Bornstein with the goal of developing light-based treatments for the elimination of bacteria and fungi that cause infections. Nomir's core technology, the Noveon®, is a laser system.2
4.
Respondent's contact information is:

Nomir Medical Technologies, Inc.
336 Singletary Lane
Framingham, MA 01702

II. COUNSEL

5.
Claimant's legal representatives are:

Howard S. Zelbo, Esq.
Jeffrey A. Rosenthal, Esq.
Mark E. McDonald, Esq. Kylie M. Huff, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 1000

6.
Respondent's legal representatives are:

Paul Friedland, Esq.
David Hille, Esq.
Preeti Bhagnani, Esq.
Joy Lee, Esq.
White & Case LLP
1221 Avenue of the Americas
New York, NY 10020-1095

III. THE ARBITRAL TRIBUNAL

7.
The Arbitral Tribunal is comprised of:

Professor William W. Park
Boston University Law Faculty
765 Commonwealth Avenue
Boston, MA 02215
Co-Arbitrator

Edna Sussman FCIArb
SussmanADR LLC
20 Oak Lane
Scarsdale, NY 10583
Co-Arbitrator

John J. Kerr, Jr., Esq.
Retired Partner
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017-3954
Presiding Arbitrator

8.
On July 17, 2017, the ICDR informed the Parties that Edna Sussman was appointed as a neutral party-designated arbitrator. On July 18, 2017, the ICDR informed the Parties that Prof. William W. Park was appointed as a neutral party-designated arbitrator. On August 31, 2017, Ms. Sussman and Prof. Park informed the ICDR that they had selected John J. Kerr, Jr. to serve as chairperson of the Arbitral Tribunal
9.
By letter dated September 5, 2017, the ICDR, informed the Parties that the ICDR had appointed John J. Kerr, Jr. as the chairperson of the Arbitral Tribunal.

IV. THE ARBITRATION AGREEMENT

10.
The dispute in this arbitration arises from an Exclusive Alliance Agreement dated November 21, 2014, between SGI and Nomir (the "EAA")3. Section 11.3 of the EAA titled "Disputes" contains an agreement to arbitrate, which provides as follows:

"(a) Resolution of all disputes over the meaning and interpretation of this Agreement shall be attempted by conciliation and mediation, and, if such conciliation and mediation is unsuccessful, then disputes shall be finally settled by a single Arbitrator selected by SELEX and NOMIR. If the Parties cannot agree on an Arbitrator, then disputes shall be resolved by an Arbitration Panel comprising one arbitrator appointed by NOMIR, one arbitrator appointed by SELEX, and a Chairman of the Arbitration Panel appointed by the first two arbitrators. Any such arbitration proceedings shall be adopted in accordance with generally accepted American Arbitration Association arbitration rules; shall be held in the State of New York, unless otherwise agreed by the Parties; and judgment upon the arbitration award may be entered in any court having jurisdiction.

(b) In order to initiate procedures for dispute resolution by conciliation, mediation, and arbitration, either Party shall give written notice to the other of its intention to resolve a dispute and, absent satisfactory resolution, then to arbitrate. Such notice shall contain a statement setting forth the nature of the dispute and the resolution sought. If, within thirty (30) days of such notice, a resolution by conciliation between the Parties themselves or by mediation has not been achieved to the satisfaction of both Parties, and, if within sixty (60) days from said written notice, an Arbitrator or Arbitration Panel has not been appointed with an arbitration schedule satisfactory to both Parties, then either Party may proceed with judicial remedies.

(c) The Parties reserve the right and power to proceed with direct judicial remedies against the other without conciliation, mediation, or arbitration for claims relating to breach of the royalty payment and sales reporting provisions of this Agreement after giving written notice of such breach to the allegedly breaching Party followed by an opportunity period of thirty (30) days in which to cure such breach. In collecting overdue royalty payments and securing compliance with reporting obligations, NOMIR may use all judicial remedies available. The Parties reserve the right to seek a restraining order to protect against impermissible disclosure of Confidential Information."

V. place and language of the arbitration

11.
Pursuant to Section 11.3(a) of the EAA, the place of arbitration is the State of New York. By agreement of the parties, the language of the arbitration is English.

VI. applicable rules

12.
Pursuant to Section 11.3(a) of the EAA, the arbitration is to be conducted "in accordance with generally accepted American Arbitration Association arbitration rules." On June 2, 2017, the AAA informed the Parties that this case would be administered under the International Arbitration Rules of the International Centre for Dispute Resolution (2014) (the "ICDR Arbitration Rules"). At the initial Case Management Conference held on October 12, 2017, the Parties confirmed to the Tribunal their agreement to have this case administered under the ICDR Arbitration Rules.
13.
The 2010 International Bar Association Rules on the Taking of Evidence in International Arbitration (the "IBA Rules") apply as guidelines, subject to the Tribunal's control of the procedural conduct of the arbitration.4

VII. applicable law

14.
The EAA provides in section 11.7 as follows:

"This Agreement shall be interpreted and the rights of the Parties determined in accordance with the laws of the State of New York not including its conflict of law provisions."

VIII. background of the dispute

15.
Claimant SGI and Respondent Nomir entered into the Exclusive Alliance Agreement, effective November 20, 2014. Pursuant to that Agreement, Nomir licensed its technology, including its Noveon laser, to SGI, and SGI undertook to develop and commercialize the Noveon laser for use in eradicating nasal MDROs by a treatment that combined the laser and a topical antibiotic.
16.
Methicillin-resistant Staphylococcus aureus ("MRSA") and Methicillin-sensitive Staphylococcus aureus ("MSSA") are strains of Staphylococcus aureus ("Staph" or "S. aureus") which is carried by a substantial portion of the population and often lives naturally in the nose in the form of colonies, without causing any symptoms. When an individual with a compromised immune system (e.g. those recovering from surgery and the elderly) is colonized with S. aureus, the bacteria can spread and cause an infection. Heathcare settings such as hospitals, long-term care facilities and ambulatory surgery centers are high-risk environments for S. aureus infections because of the high proportion of people colonized with S. aureus combined with those who are immune-compromised. MRSA is antibiotic resistant, and MSSA is antibiotic sensitive. MRSA presents an enormous and growing problem for hospitals and patients, with the potential for serious or even life-threatening infection for surgical patients. MRSA and MSSA are both capable of causing infections, but MRSA infections are more expensive to treat, and the mortality rate for MRSA infections is higher. As a result, the Centers for Disease Control and Prevention ("CDC") in the US have categorized MRSA as a serious threat and one which requires aggressive and innovative action.5
17.
Nomir's Noveon laser system uses two wavelengths of near-infrared light (870 nanometers and 930 nanometers). In simple terms, according to Nomir, the laser weakens the resistance mechanisms of bacteria, making the bacteria more susceptible to killing by antibiotics than they otherwise would be. In experiments conducted in 2006 and 2007, Nomir found that exposure of several species of bacteria and fungi to the Noveon laser wavelengths increased their susceptibility to antibiotics at temperatures that were safe for human tissue.6 In November 2007, Nomir secured its first FDA clearance which allowed Nomir to market the device for use in podiatry and otolaryngology (ear, nose, and throat) and to conduct human clinical trails involving the human toe and the human nostril. Based on its laboratory work and limited human clinical trials, Nomir's plan was to develop and commercialize the Noveon laser for MRSA nasal decolonization.7
18.
Nomir recognized that it needed to conduct further clinical trials with statistically relevant patient sample sizes to obtain data demonstrating the superiority of Nomir's proposed combination treatment (laser plus mupirocin, a topical antibiotic) over treatment with mupirocin alone (the most commonly used treatment) for MRSA decolonization before it could obtain FDA and European approvals necessary to market its product in the US and Europe.8 However, Nomir lacked the financial resources to pursue its plan.
19.
SGI's subsidiary Lasertel, Inc. ("Lasertel"), which manufactured high-powered semi-conductor laser components and developed laser solutions primarily for defense and industrial applications, contracted with Nomir to manufacture the Noveon laser in 2010. SGI's parent Leonardo's primary areas of focus were helicopters, aerospace, land and naval defense, and security systems. However, Leonardo desired to expand its business into the medical technology field. Lasertel introduced Nomir and SGI in 2013, and that introduction led to SGI and Nomir entering into the EAA in 2014.9
20.
Pursuant to the EAA, the Parties agreed on a Business Plan for the development and commercialization of Nomir’s laser technology which included, inter alia, hardware and software modifications to the Noveon laser, pilot and clinical trials, and a timetable for achieving each phase of activity. The Parties agreed to do two human pilot studies before conducting the clinical trial, and the University of Edinburgh ("UoE") medical faculty were engaged to conduct the pilot studies at the Edinburgh Royal Infirmary ("ERI"). Separately, UoE was engaged to replicate Nomir’s former lab work to confirm the science worked as Nomir claimed. The first human pilot study was conducted in 2015-16. The second human pilot study was scheduled to commence in 2017, but before it started Nomir terminated the EAA on March 17, 2017, after a series of exchanges between the Parties that had become increasingly hostile. On May 26, 2017, SGI commenced this arbitration.

IX. HISTORY OF THE PROCEEDING

21.
On May 26, 2017, SGI commenced this arbitration by filing a Demand for Arbitration with the American Arbitration Association ("DFA"). This was followed by a Demand for Arbitration pleading dated May 31, 2017, which sought an award declaring that Nomir materially breached, wrongfully terminated and repudiated the EAA and sought compensatory damages in an amount to be determined.10
22.
On July 21, 2017, Nomir submitted its Counterclaim and Answer ("CC&A") denying SGI’s claims and seeking an award declaring that SGI "ceased material development and commercialization of Licensed Products pursuant to the Business Plan" and such failure was not cured within 60 days following written notice of such failure, declaring the EAA was properly terminated by Nomir, and awarding damages to Nomir in an amount to be determined.11
23.
On September 14, 2017, SGI submitted its Answer to Counterclaim ("ACC") seeking an award denying Nomir’s counterclaim.12
24.
Between July 17, 2017, and September 5, 2017, the Arbitral Tribunal was constituted pursuant to Section 11.3(a) of the EAA.
25.
On October 12, 2017, an initial Case Management Conference was held during which counsel for the Parties and the Tribunal addressed procedural and scheduling matters.
26.
On November 9, 2017, in follow up to the Case Management Conference, counsel for the Parties jointly submitted a draft initial procedural order, which included proposed supplemental rules and a timetable. On November 18, 2017, the Tribunal issued Procedural Order No. 1 with Procedural Timetable setting forth the dates for written submissions and other important dates in the case.
27.
On December 15, 2017, SGI submitted Claimant's Opening Memorial ("SGI 1st Mem") along with the First Witness Statement of Graeme Creamer, the First Witness Statement of Andrew Box, Claimant's exhibits C-1 to C-235, and Claimant's legal authorities CL-1 to CL-10.
28.
On March 15, 2018, Nomir submitted Respondent's Counter-Memorial ("Nomir 1st Mem") along with the First Witness Statement of Dr. Eric Bornstein, the First Witness Statement of Dr. Jack Kay, the First Expert Report of Dr. Michael R. Hamblin, the First Expert Report of Dr. Brian E. Harvey, the First Expert Report of Garrett W. Rush, Respondent's exhibits R-1 to R-134, Respondent's legal authorities RL-1 to RL-11, and Appendix A "Dramatis Personae".
29.
On March 30, 2018, the Parties exchanged requests for the production of documents.
30.
On April 27, 2018, the Parties submitted their disputes concerning document requests to the Tribunal in the form of Redfern Schedules.
31.
On May 14, 2018, the Tribunal issued its rulings on disputed document requests using the Parties' Redfern Schedules.
32.
By letter dated May 21, 2018, SGI requested reconsideration of certain of the Tribunal's rulings with respect to the Parties' Redfern Schedules. Later on the same day, Nomir in an email urged that SGI's request should be summarily denied. At the Tribunal's invitation, Nomir submitted a more complete response on May 30, 2018.
33.
On June 6, 2018, the Tribunal responded to SGI's request by issuing Procedural Order No. 2 which (i) allowed SGI to submit to Nomir a small number of narrow and specific requests for documents essential to the case, and (ii) clarified two of the Tribunal's rulings on SGI's document requests (Nos. 3 and 12) concerning what documents Nomir was expected to produce.
34.
The Tribunal received a letter from SGI dated August 20, 2018, a letter from Nomir dated August 28, 2018, and an email from SGI dated August 29, 2018, concerning a request by SGI that the Tribunal order Nomir to produce unredacted copies of a September 15, 2016, Parexel Proposal, a September 30, 2016 Revised Parexel Proposal, and additional Nomir documents reflecting communications between Nomir and Parexel regarding the proposals, all of which Nomir produced in redacted form. On August 30, 2018, the Tribunal issued Procedural Order No. 3 ordering Nomir to produce unredacted copies of the Parexel Proposal, the Revised Parexel Proposed and certain other related documents.
35.
On September 9, 2018, SGI submitted Claimant's Reply Memorial ("SGI 2nd Mem") along with the Second Witness Statement of Graeme Creamer, the Second Witness Statement of Andrew Box, the First Expert Report of Dr. Mark Wilcox and Dr. Stanley Brown, the First Expert Report of Christy Foreman, the First Expert Report of Laura B. Stamm, Claimant’s exhibits C-236 to C-368, and Claimant’s legal authorities CL-11 to CL-42.
36.
On December 2, 2018, Nomir submitted Nomir’s Rejoinder ("Nomir 2nd Mem") along with the Second Witness Statement of Dr. Eric Bornstein, the Second Witness Statement of Dr. Jack Kay, the Second Expert Report of Dr. Michael R. Hamblin, the Second Expert Report of Dr. Brian E. Harvey, the Second Expert Report of Garrett W. Rush, the Expert Report of Dr. Aaron Glatt, Respondent’s exhibits R-135 to R-294A, and Respondent’s legal authorities RL-12 to RL-42.
37.
The Tribunal received a letter from SGI dated January 23, 2019, requesting the Tribunal’s intervention in a document dispute that had arisen between the parties. At the invitation of the Tribunal, Nomir submitted a letter dated January 28, 2019, responding to SGI’s letter, and subsequently SGI submitted a reply letter dated January 29, 2019, and Nomir submitted a sur-reply letter dated the same date. The dispute concerned SGI’s Document Requests Nos. 2 and 3, the Tribunal’s Redfern Schedule rulings on Nomir’s objections to those requests, and Nomir’s compliance with those requests and rulings. In Procedural Order No. 4, dated February 9, 2019, the Tribunal gave the Parties certain directions with respect to SGI’s Document Requests Nos. 2 and 3, to be complied with by February 15, 2019.
38.
Between February 15, 2019, and March 1, 2019, the Tribunal received a stream of letter submissions (no less than 8 substantive communications) from the Parties concerning Nomir’s production of additional documents subsequent to Procedural Order No. 4. On March 3, 2019, the Tribunal acknowledged receipt of these letters and confirmed its acceptance of the Parties’ agreement to extend SGI’s time to file its Rejoinder to Counterclaim (originally due on February 22, 2019) to March 15, 2019.
39.
One of the letters received by the Tribunal in the February 15 to March 1 period was a letter from SGI dated February 25, 2019, in which SGI requested that the Tribunal require Nomir to provide security for costs due to Nomir’s alleged non-compliance with prior disclosure orders. SGI indicated that it intended to seek an award of costs, including attorneys’ fees, at the conclusion of the Hearing. In SGI’s view, Nomir’s conduct warranted meaningful sanctions should the Tribunal conclude that the non-production was deliberate, and SGI requested security to cover those sanctions in the amount of $500,000. In a letter dated February 27, 2019, Nomir objected to providing security for costs and requested that SGI’s application be denied. SGI submitted a reply dated February 27, 2019. On March 3, 2019, the Tribunal informed the Parties that it would defer decision on the request for security for costs.
40.
On March 4, 2019, SGI informed the Tribunal that it had received 659 additional documents from Nomir on February 28 and March 1, which SGI was still reviewing and which allegedly should have been produced the previous summer during the document production phase of the case. These documents were in addition to 1,210 documents produced by Nomir between February 15 and February 22. In view of concerns raised by the untimely productions, SGI informed the Tribunal that it no longer believed that it was feasible to submit its Rejoinder on March 15 or to hold the Hearing on April 8-12, 2019. In its responsive letter dated March 6, 2019, Nomir indicated that it did not oppose a postponement of the merits Hearing, saying time was needed to investigate the document production issues raised by SGI and to make any further production.
41.
In an email dated March 8, 2019, the Tribunal noted that the Parties were in agreement that the Hearing should be rescheduled to allow the Parties time to work through the document issues that had arisen and for SGI to have additional time to prepare and submit its Rejoinder after resolution of the document issues. Later on March 8, 2019, the Tribunal, with the agreement of the Parties, formally confirmed that the March 15, 2019, deadline for SGI’s Rejoinder was adjourned sine die and the Hearing scheduled for April 8-12, 2019 was postponed. The Tribunal noted Nomir’s commitment to provide an update by March 20 on its document production.
42.
On March 27, 2019, Nomir submitted its report concerning its further investigation of its document productions, having been granted an extension to submit it. There followed SGI’s response dated April 2, 2019, and subsequent reply letters from SGI and Nomir dated April 3, 2019. Nomir denied that it had destroyed documents after the institution of a "litigation hold" or that it had intentionally withheld responsive documents and represented that it would continue searching its files for certain documents. SGI raised a number of concerns about what it described as glaring shortcomings in Nomir’s proposal regarding further document production and made specific requests for rulings by the Tribunal. In addition, SGI indicated that it intended to file an application for costs and/or sanctions after submitting its Rejoinder.
43.
On April 12, 2019, the Tribunal issued Procedural Order No. 5 (i) ruling on SGI’s requests, (ii) directing Nomir to complete its rolling production by April 30, 2019, and (iii) directing SGI to submit its Rejoinder by May 31, 2019. With respect to SGI’s expression of intention to make an application for costs and/or sanctions for Nomir’s late production of documents, the Tribunal expressed its view that such application was premature and should be deferred until after the Hearing on the merits, at which point the Tribunal would be in a better position to know whether the newly produced documents were important and necessary for the determination of the issues in the case as SGI suggested, or whether they were largely duplicative and add little to what Nomir had already produced during the document production phase of the case as Nomir suggested.
44.
On April 29, 2019, the Tribunal issued Procedural Order No. 6 with Revised Procedural Timetable setting, inter alia, May 31, 2019, as the date for SGI’s Rejoinder to Counterclaim and January 20-24, 2020, as the dates of the Hearing on the merits.
45.
On May 31, 2019, SGI submitted Claimant’s Rejoinder to Counterclaim along with the Third Witness Statement of Graeme Creamer, the Third Witness Statement of Andrew Box, the Second Expert Report of Dr. Mark Wilcox and Dr. Stanley Brown, the Second Expert Report of Christy Foreman, the Second Expert Report of Laura Stamm, the Expert Report of James E. Malackowski, Claimant's exhibits C-369 to C-555B, and Claimant's legal authorities CL-43 to CL-89.
46.
In a letter dated July 8, 2019, SGI requested an order from the Tribunal compelling Nomir to post security for the costs SGI incurred as a result of Nomir's late production of documents necessitating a delay in SGI's completing and submitting its Rejoinder and a postponement of the Hearing from April 2019 to January 2020. In its responsive letter dated July 16, 2019, Nomir objected to providing security for costs on a number of grounds. After receiving a brief email response to Nomir's letter from SGI on July 17, 2019, the Tribunal wrote to the Parties in a September 2, 2019, email requesting additional information relevant to the application and scheduled oral argument on the application. On September 30, 2019, both Parties made further submissions.
47.
On October 17, 2019, oral argument was held on the security for costs application at the AAA/ICDR hearing facilities on East 42nd Street in New York City.
48.
On November 6, 2019, the Tribunal issued Procedural Order No 7 denying SGI's application for an order requiring Nomir to post security for SGI's costs incurred as a result of Nomir's late production of documents. In reaching this decision, the Tribunal: (i) found that it has the authority to award as costs expenses relating to the production of documents and to allocate such costs if it determines such allocation is reasonable; (ii) found that the powers of a Tribunal under the ICDR Arbitration Rules to grant interim relief and to allocate costs are sufficiently broad to allow the Tribunal to order security for costs; and (iii) determined that in the circumstances of this case, weighing the right of Nomir to have arbitral justice with the right of SGI to recover costs if it succeeds on its document production claim, security for costs was not warranted. While Nomir's lack of financial resources and reliance on a third-party funder to pursue its claim in this arbitration are undisputed, the issues of whether Nomir's late production was the result of intentional misconduct and whether the documents withheld are important and necessary for the determination of the issues in this case are disputed, and the Tribunal had already deferred resolution of these issues until after the Hearing on the merits when the Tribunal would be in a better position to understand the relative importance of the late-produced documents, whether any documents were intentionally withheld, and whether any documents were destroyed. In the view of the Tribunal, to decide the merits of SGI's document claims at that stage of the case would require the Tribunal to review thousands of documents and likely to hold a hearing, a process that would be time-consuming and expensive, and which could result in a further delay of the Hearing on the merits.
49.
On December 5, 2019, the Parties exchanged notices of the witnesses (factual and expert) they wished to cross-examine at the Hearing.
50.
Neither Party submitted a request to the Tribunal by the December 12, 2019, deadline to hear the live testimony of a witness whose cross-examination was not required.
51.
Between December 10, 2019, and December 16, 2019, the Parties and the Tribunal in exchanges of correspondence worked out the details of the requirement that the Parties submit to the Tribunal by December 19, 2019, a joint set of exhibits.
52.
On January 8, 2020, a Pre-Hearing Conference was held by telephone to finalize the arrangements for the Hearing.
53.
On January 10, 2020, the Tribunal issued Procedural Order No. 8 confirming the arrangements for the Hearing.
54.
The Hearing on the merits of this case was conducted on January 20-24, 2020, in New York, New York at the New York International Arbitration Center on East 42nd Street. The following witnesses appeared and testified at the Hearing:

SGI Fact Witnesses
Mr. Graeme Creamer (Director of Major Subcontracts of SGI)
Mr. Andrew Box (Vice President of Capability Development and Chief Technical Officer for Support & Service Solutions of Leonardo)

Nomir Fact Witnesses
Dr. Jack Kay (Chairman of the Board, President and Chief Executive Officer of Nomir)
Dr. Eric Bornstein (Founder, Chief Science Officer and Chief Medical Officer of Nomir)

SGI Expert Witnesses
Dr. Stanley Brown
Dr. Mark Wilcox
Ms. Christy Foreman
Ms. Laura Stamm
Mr. James E. Malackowski

Nomir Expert Witnesses
Dr. Michael R. Hamblin
Dr. Aaron Glatt
Dr. Brian E. Harvey
Mr. Garret W. Rush

55.
On January 31, 2020, a Case Management Conference was held to address the proceedings in the case following the Hearing.
56.
On February 2, 2020, the Tribunal issued Procedural Order No. 9 confirming the schedule of proceedings subsequent to the Hearing, to which was attached a Post-Hearing Procedural Timetable.
57.
On March 13, 2020, the Parties submitted their Post-Hearing Memorials and related submissions, including a Chronology of significant events.
58.
On April 3, 2020, the Parties submitted their Submissions on Costs.
59.
On April 15, 2020, oral Final Arguments were held via teleconference. On June 10, 2020, at the invitation of the Tribunal the Parties supplemented their Submissions on Costs to include the Final Arguments.
60.
On June 12, 2020, the Tribunal closed the Hearing pursuant to Article 27 of the ICDR Arbitration Rules.

X. THE EXCLUSIVE ALLIANCE AGREEMENT

61.
There are a number of provisions of the EAA that are relevant to the dispute between the Parties. The most important provisions are set forth below in relevant part.
62.
In the section on defined terms:

"1. DEFINITIONS

The following terms are defined solely for the purposes of this Agreement.

‘SELEX’ shall include SELEX Galileo Inc., and any other entities which SELEX controls through majority ownership or through other means.

‘Field of Use’ shall mean the use of the Licensed Products, Licensed Patent Rights, Licensed Applications and associated Know-How only for Human Nasal Decolonization of multi-drug-resistant-organisms (‘MDRO’s’).

‘Nomir Technology’ shall mean, only within the Field of Use, all inventions, designs, know-how, and technologies developed or licensed by NOMIR, whether patented or unpatented, including without limitation Intellectual Property, inventions, designs, know-how, and technologies relating to photobiological effects of lasers operating at, near or within the 850 to 890 nm and/or the 910 to 950 nm ranges developed or acquired by NOMIR prior to or after the Effective Date of this Agreement.

‘Licensed Products’ shall mean, only within the Field of Use, products or uses claimed or embodied in a Licensed Patent or Licensed Application or products or uses utilizing NOMIR Technology."

63.
The license granted to SGI:

"2. EXCLUSIVE LICENSE

a) NOMIR hereby grants to SELEX an exclusive license (the ‘License’) to the NOMIR Technology, including all of NOMIR’s rights in Licensed Patents, Licensed Products and Licensed Applications and Know-How (subject to the rights retained by NOMIR as described below) to make, use, sell, have made, import, and export Licensed Products, Licensed Applications and Licensed Services. The scope of this License shall be restricted to the Field of Use and the Territory."

64.
Nomir’s responsibilities:

"5. RESPONSIBILITIES OF NOMIR

a) NOMIR Know-How and Support - NOMIR shall provide to SELEX at no charge reasonable amounts of technical consulting assistance for hardware and software modifications to the NOMIR Noveon platform, the conduct of in vitro, pilot. clinical trials and regulatory compliance (FDA, EU/CE, TGA, Health Canada, and other international agencies). NOMIR shall also provide to SELEX at no charge reasonable amounts of technical and business support and advice for public relations, marketing and business development planning and training as required in the biological effects of the technology.

b) NOMIR will have the lead role in technology research and development relating to the NOMIR Technology, but NOMIR shall not be obligated to develop the NOMIR technology beyond its current state as of the Effective Date."

65.
SGI’s responsibilities:

"6. RESPONSIBILITIES OF SELEX

a) SELEX shall use all reasonable efforts to maximize Net Sales Revenues in the Territory to be derived during the Term from the NOMIR Technology, including Licensed Patents, Licensed Applications, Licensed Products and Licensed Services.

b) SELEX shall, as necessary to achieve the earliest possible commercialization of the NOMIR Technology and the greatest feasible amount of Net Sales Revenues in the Field of Use and in the Territory, undertake at its own cost: i) hardware and software modifications to the NOMIR Noveon platform, ii) the conduct of in vitro, pilot and clinical trails, iii) regulatory compliance (FDA, EU/CE, TGA, Health Canada, and other international agencies) and iv) product rollout including ongoing revenue generating activities such as sales, marketing, warranty and support.

c) SELEX shall develop and provide to NOMIR within sixty (60) days following the Effective Date a detailed business plan (the ‘Plan') outlining strategy and tactics in the pursuit of marketing and selling laser systems in the Field of Use and the Territory. The Plan shall include a staged approach, first addressing the European Union (‘EU'), then the United States (‘USA') and then the Rest of the World (‘ROW') for i) hardware and software modifications to the NOMIR Noveon platform, ii) the conduct of in vitro, pilot and clinical trials, iii) regulatory compliance (FDA, EU/CE, TGA, Health Canada, and other international agencies) and iv) product rollout including sales, marketing, warranty and support. The Plan shall include a specific but non-binding timetable for the achievement of each of the foregoing phases of activity in the EU, USA and ROW. For the purposes of this Agreement the term ‘EU' does not necessarily include all member countries as market opportunities, but, unless there are compelling reasons not to develop any of the following individual country markets, EU shall include Germany, France, U.K., Italy, Spain, The Netherlands, Poland, Sweden, Belgium, and Austria. The Plan will be based on best available knowledge at the time and subject to change as information and data mature or become available. Geographies within the Territory, other than the USA and the ten designated EU countries cited in the Subsection 6.c), may be subsequently removed from the Plan if the emerging Territory business case does not meet cost benefit and investment targets set by SELEX. The decision to remove such geographies from the Plan will be at the sole discretion of SELEX. SELEX shall inform NOMIR within 30 days of reaching its decision to exclude any geography from the Plan, in which case NOMIR shall immediately be free to pursue any sales and marketing alternatives in such excluded geographies at its sole discretion. The Plan shall also include specific measures and alternative sources to avoid indefinite dependence on sole-source suppliers to be utilized by SELEX for any critical or long-lead-time components that will be included in the Licensed Products. Use of sole source suppliers shall not in itself cause any breach of this Agreement.

d) SELEX will provide to NOMIR during the Term of this Agreement semi-annual reports (SELEX format), every six (6) months and twelve (12) months following the Effective Date, on SELEX's business development and technological development activities sufficient for NOMIR to evaluate SELEX's compliance with its obligations under the Plan.

e) NOMIR shall, within fifteen (15) business days of receipt of the SELEX Plan and semi-annual updates thereto specified in subsections c) and d) of this Section 6, advise SELEX of any questions, comments or requested changes to the Plan. The Parties shall promptly work together in good faith to resolve any such matters.

f) SELEX shall use its best efforts to achieve the quarterly revenue milestones and pay NOMIR the Minimum Quarterly Royalties specified in the attached Exhibit B: Minimum Forecasted Quarterly Royalties.

g) NOMIR shall, within fifteen (15) business days of receipt of the SELEX Plan and updates thereto specified in subsections c), d), e) and f) of this Section 6, advise SELEX of any questions, comments or requested changes to the Plan. The Parties shall promptly work together in good faith to resolve any such matters.

h) SELEX will have the lead role in design and manufacturing and will collaborate with NOMIR on product designs and performance features. However, NOMIR’s role in this regard shall be only advisory, and SELEX shall be solely responsible for design and manufacturing decisions.

i) The Plan may be amended from time to time by mutual agreement of the Parties as circumstances change and as may be required to achieve the objectives of this Agreement. The Parties will keep each other informed of all efforts being undertaken under this Agreement.

j) SELEX Know-How and Support - SELEX shall provide to NOMIR at no charge reasonable amounts of technical assistance for hardware and software modifications to the NOMIR Noveon platform, for research purposes of Future Inventions as defined in Section 4 of this Agreement. This may also include the loan provision of modified hardware and/or software as agreed between the Parties."

66.
The provision on indemnification and limitation on damages:

"9. INDEMNIFICATION

Each Party shall defend, indemnify and hold the other Party harmless from and against any and all claims, actions, suits, loss, injury, expenses, damages, liability, costs and expenses (including reasonable attorneys’ fees) of any kind or nature arising out of, or resulting from, the exercise or practice of any license granted under this Agreement, including without limitation, liabilities arising from the research, Third Party collaboration, clinical studies, production, manufacture, sale, use, lease, or advertisement or Licensed Products, Licensed Applications or Licensed Services, except to the extent caused by the other Party’s willful or negligent acts or omissions as determined by a court of competent jurisdiction.

Notwithstanding any other provisions and clauses of this Agreement neither Party shall be liable for loss of use, loss of business, loss of revenue, or any other incidental, special, indirect, consequential loss or damages, or punitive or exemplary damages to the other Party howsoever caused."

67.
The termination provision:

"10. TERM AND TERMINATION

(c) NOMIR shall have the right to terminate this Agreement if SELEX ceases material development and commercialization of Licensed Products pursuant to the Plan and such failure is not cured within sixty (60) days following SELEX's receipt of written notice of such failure."

68.
The provision concerning the entire agreement and modification:

"11.4 ENTIRE AGREEMENT; MODIFICATION; WAIVER

Aside from the referenced Confidentiality and Mutual Non-Disclosure Agreement, this Agreement constitutes the entire agreement between the Parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and understandings of the Parties. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the Party making the waiver."

XI. THE CLAIMS AND DEFENSES OF THE PARTIES

69.
The claims and defenses of the Parties are set forth in their pleadings and memorials. They are summarized briefly in this section. More detailed statements of specific positions are set forth in Sections XII and XIII below.

A. Claimant's Claims

70.
Claimant SGI seeks recovery of its damages caused by Nomir's alleged wrongful termination of the EAA. Under the EAA, SGI (and its affiliates) worked for more than two years to develop and commercialize Nomir's laser technology for use in eradicating multi-drug resistant organisms ("MDROs"), i.e. antibiotic-resistant bacteria, from patients' nostrils (referred to as the "MDRO Project" or the "Project"). Selex invested more than $3.5 million and many hours of effort into this Project, until those efforts were halted by Nomir's allegedly wrongful termination just as Nomir's laser technology was about to be meaningfully tested on patients for the first time. SGI requests the Tribunal to find that this was a material breach of the EAA and award SGI damages equal to its investment in the project."13
71.
According to SGI, Nomir’s right to terminate the EAA was limited. Nomir could terminate the EAA only if SGI ceased material development of the laser pursuant to the Parties’ agreed-upon Business Plan developed pursuant to Section 6(c) of the EAA (the "Business Plan"). SGI contends that it never ceased such development and continued to pursue the Business Plan and the MDRO Project up until Nomir terminated the EAA in March 2017.14
72.
In support of its contention that it never ceased material development of the Project pursuant to the Business Plan, SGI describes its efforts as including: (a) SGI enlisted its affiliates Lasertel and Leonardo to participate in the project; (b) with Leonardo’s assistance, SGI enlisted the UoE medical school and the ERI to have UoE’s faculty conduct a clinical trial of Nomir’s laser technology at ERI, a necessary step before securing regulatory approval to sell the laser; (c) the UoE clinicians began developing a protocol for a clinical trial to take place on patients of ERI’s orthopedics department with the goal of showing the laser’s efficacy and safety; (d) Leonardo enlisted microbiologists at UoE to perform laboratory experiments to independently confirm Nomir’s previous work (which Nomir claimed had proven the laser "photobiologically" weakened the antibiotic resistance of a particular species of MDRO that colonizes inside the nose, without harming human issue); (e) shortly after signing the EAA on November 20, 2014, the Parties agreed, at Nomir’s suggestion, that UoE would first conduct a two-phase human pilot study at ERI before proceeding with a clinical trial, and SGI delivered a draft Business Plan to Nomir in accordance with the EAA which was agreed upon by March 2015; (f) the Business Plan established a series of milestones to be achieved before the laser could be commercialized, which included a two-phase human pilot study at ERI, the results of which would be presented to the U.S. Food and Drug Administration ("FDA") to obtain its input on the design of the clinical trial, to be conducted by UoE at ERI, subject to the results of the pilot study; (g) consistent with the Business Plan, Selex invested time and resources to redesign Nomir’s laser from a lab device into a new production-standard device which could be used by hospital staff on patients in the pilot and clinical trails and had them manufactured and delivered to Edinburgh for the second phase of the pilot, which would be the first time UoE tested the laser on real patients with s. aureus colonization; (h) Selex and UoE obtained numerous ethical, R&D and regulatory approvals for commencing both phases of the human pilot study; (i) Selex reached agreement with Nomir on a protocol for the first phase of the planned human pilot study ("HP1") after the Business Plan was finalized; (j) UoE completed HP1 with 100 s. aureus-positive patients following the agreed protocol; (k) Selex and UoE developed a protocol to guide the second phase of the human pilot study ("HP2") which they provided to Nomir; (l) SGI and Nomir agreed on the HP2 protocol which would test laser plus antibiotics and laser alone; and (m) just as Selex and UoE were to receive the last of the necessary approvals for the HP2 study to commence, Nomir terminated the EAA, preventing the HP2 study from ever happening.15
73.
According to SGI, while these efforts were going on, a significant issue arose concerning Nomir's laser technology. Before signing the EAA, Nomir had represented to SGI that it had already tested and demonstrated the safety and effectiveness of its laser technology. However, despite the UoE scientists performing the same in vitro experiments that Nomir performed as per the agreed Business Plan, their results did not replicate Nomir's claimed results in the lab. While UoE observed that the laser, either on its own or in combination with antibiotics, had a killing effect on s. aureus in vitro, such killing was accompanied by a rise in temperature that would be unsafe and intolerable to humans. In addition, UoE's independent lab testing led the UoE microbiologists to believe the laser might not "potentiate" (i.e., increase the effectiveness of) antibiotics on the bacterial cells, or at least not in the way Nomir had claimed.16
74.
Selex tried to broker a scientific exchange on these issues between UoE and Nomir. However, SGI contents that Nomir was largely unreceptive to any investigation of its work or claimed lab results, and thus was either unwilling or unable to respond constructively to UoE's concerns. Nomir tried to discourage any further testing, claiming that independent validation was wasteful and unnecessary. In SGI's view, had such testing confirmed the safety and effectiveness of Nomir's technology, it would have enhanced the prospects of obtaining necessary regulatory approvals.17
75.
The fact that UoE's lab work did not independently confirm Nomir's claimed test results, and Nomir's combativeness and inability to explain persuasively how its technology worked, raised concerns in SGI's mind about whether Nomir's technology was as effective or safe as Nomir had represented. Nonetheless, Selex continued to press ahead to progress the Project.18
76.
Notwithstanding Selex's two years of work to achieve the Business Plan milestones, Nomir sent SGI a demand letter on September 2, 2016, later incorporated into a formal Notice of Dispute, describing five categories of alleged breaches of the EAA by SGI, none of which described a cessation of material development. SGI responded to these allegations, which it viewed as spurious, on December 15, 2016, but instead of responding to the letter Nomir gave a Notice of Default on January 2, 2017, and a Notice of Termination on March 17, 2017, stopping the MRDO Project.19
77.
At the time of Nomir's wrongful termination of the EAA, Selex had spent $3,105,861 (after accounting for a grant from the Scottish Government). SGI seeks an award finding that Nomir breached, wrongfully terminated and repudiated the EAA, and granting SGI $3,105,861 in compensatory damages, plus interest and costs of the arbitration, and such further relief as the Tribunal deems appropriate.20

B. Respondent's Claims and Defenses

78.
According to Nomir, SGI undertook in the EAA to develop and commercialize Nomir's Noveon laser for use in eradicating nasal MDROs by a treatment that combined the laser and a topical antibiotic. However, instead, through worthless clinical studies, botched research, and a misguided desire to use Nomir's technology to develop a different product, SGI and its affiliates made no progress on the parties' MDRO Project. Nomir contends that having seen its technology misused and the market opportunity squandered for nearly two and a half years, it had no choice but to terminate the EAA.21
79.
Nomir maintains that the central fact in this case is that after the HP1 study yielded no usable data because there were no MRSA-colonized patients that could be tested at the ERI, SGI insisted on staying at the same site with the same demographic for the HP2 study, thereby dooming the Project and ceasing material development of Nomir's technology under the EAA.22
80.
According to Nomir, the reasons for SGI's insistence on conducting the HP2 study at ERI were: (a) SGI was controlled by its parent company and had no money or power of its own to proceed with the Project, and SGI's parent was primarily interested in using Nomir's technology for another purpose, namely to pursue a "laser-alone" eradication of non-MDRO nasal bacteria without topical antibiotics; (b) SGI and its parent tied itself to Edinburgh as the site for all testing when it obtained a grant from the Scottish Government which required SGI to do the testing in Scotland; and (c) there were many MSSA patients in Edinburgh (but few MRSA patients) which suited SGI's parents' pursuit of a laser-alone project aimed at MSSA.23
81.
Nomir contends that it was entitled to terminate the EAA under Section 10(c) because SGI ceased material development of the Licensed Product pursuant to the Business Plan. SGI ceased material development when it failed and refused to expand the human pilot study to reach more MRSA patients after it was evident that there were insufficient MRSA patients at the ERI. Thus, by January 2017, when Nomir served the Notice of Default under Section 10(c) of the EAA, no material progress had been made on the human pilot study.24
82.
Nomir contends that SGI also breached the EAA in three other material respects prior to its termination.
83.
First, Nomir contends that SGI failed to conduct in vitro, pilot and clinical trials as necessary to achieve the "earliest possible commercialization" of Nomir’s technology in breach of Section 6(b) of the EAA. SGI failed to do so in four principal ways: (a) by failing to exercise due diligence to select a clinical trail site with sufficient patients with the relevant condition being studied and failing to expand the study when circumstances revealed the inadequacy of ERI; (b) by studying the wrong bacterial pathogen (MSSA) using Nomir’s intellectual property to the detriment of the MDRO Project; (c) by failing to consult with either the FDA or with regulatory experts as necessary to prepare protocols for HP1 and HP2; and (d) by engaging in research efforts to duplicate Nomir’s prior work that was marked by fundamental incomprehension about Nomir’s technology and rudimentary errors, resulting in incorrect conclusions.25
84.
Second, Nomir contends that SGI failed to use best efforts to achieve the quarterly revenue milestones in breach of Section 6(f) of the EAA. According to Nomir, SGI could have pursued any number of reasonable approaches to achieve commercialization of the Noveon laser and the quarterly revenues therefrom. However, SGI was content to leave Nomir’s technology undeveloped in deference to its parent’s business and research objectives.26
85.
Third, Nomir contends that SGI failed to use all reasonable efforts to maximize net sales revenues from the Nomir technology in breach of Section 6(a) of the EAA.27
86.
Nomir seeks to recover damages for SGI’s breaches of the EAA under two alternative theories.
87.
First, Nomir seeks to recover damages for "total breach" of the EAA as a result of SGI’s cessation of material development and commercialization pursuant to the Business Plan. (Nomir’s "Termination Claim"). The general measure of damages that flow from the "total breach" of contract is the difference between the value of what has been received under the contract and the value of what would have been received had the contract been performed according to its terms. According to Nomir, the royalties it would have received had the EAA been performed according to its terms is $242,034,425, and the value of what it received under the EAA is zero. Nomir’s valuation expert Garrett W. Rush determined the present value (as of the date of termination of the EAA) of the royalties to be $219,078,177 after applying a risk adjustment for technical risk (85%) and a discount rate (14.4%). Thus, for its Termination Claim Nomir seeks $219,078,177 plus $1,333,969 for each month after August 1, 2019, that such amount is not paid.28
88.
Alternatively, Nomir seeks to recover damages for SGI’s breaches of the "earliest possible commercialization," "best efforts" and "all reasonable efforts" obligations in Sections 6(a), (c) and (f) of the EAA (Nomir’s "Delay Claim"). Nomir contends that these breaches caused a delay of 2.33 years by the time the EAA was terminated on March 17, 2017, pushing the date for anticipated receipt of royalties back by this period. For its Delay Claim Nomir seeks $88,477,795, the present value after applying the same risk adjustment and discount rate applied to its Termination Claim.29
89.
In summary, Nomir seeks an award: (a) denying SGI’s claims; (b) declaring that SGI ceased material development and commercialization of Licensed Products pursuant to the Business Plan and such failure was not cured within 60 days of written notice; (c) declaring that the EAA was properly terminated by Nomir in accordance with Section 10(c) of the EAA; (d) awarding damages in the amount of $219,078,177 (inclusive of pre-award interest at New York’s statutory rate of 9%) for Nomir’s Termination Claim; (e) awarding additional damages at a rate of $1,333,969 per month until the award is paid; (f) in the alternative to subparagraphs (d) and (e) awarding damages in the amount of $88,477,795 (inclusive of pre-award interest at New York’s statutory rate of 9%) for Nomir’s Delay Claim; (g) ordering SGI to reimburse Nomir all "costs of the arbitration"; (h) ordering post-award interest at New York’s statutory rate of 9%; and (i) ordering such other and further relief as the Tribunal deems appropriate.30

C. Claimant's Defenses

90.
SGI denies that it ever ceased material development and commercialization of Licensed Products pursuant to the Business Plan. According to SGI, the Parties always contemplated the study of both MSSA and MRSA, and Selex did not study MSSA at the expense of MRSA. The Business Plan, the HP1 Protocol and the Initial Clinical Trial Protocol all discuss testing on MSSA. According to SGI, Nomir’s own pre-EAA research focused primarily on MSSA, and the sales projections attached to the Business Plan included the treatment of MSSA. While SGI never ceased pursuing a laser-plus-mupirocin approach, the study of a potential laser-alone treatment was also within the scope of the EAA and approved by Nomir. Moreover, SGI contends, the Parties agreed to conduct the trails in Edinburgh knowing the incidence rates for MRSA, and Nomir knew about and supported the Scottish Enterprise grant, which did not require Selex to conduct all its work in Scotland.31
91.
According to SGI, the HP1 study achieved its purpose of determining a baseline mupirocin failure rate, and the decision in the Business Plan to wait to engage the FDA was made mutually and for compelling reasons.32
92.
SGI contends that the EAA’s language unambiguously requires SGI to "cease" material development and commercialization pursuant to the Business Plan in order to permit Nomir to terminate, and none of Nomir’s complaints amount to a ceasing of material development and commercialization. Because SGI did not cease material development, Nomir wrongfully terminated the EAA.33
93.
SGI argues that because Nomir wrongfully terminated the EAA, its counterclaims fail as a matter of law because a party seeking damages for breach of contract must prove that it performed the contract and did not itself materially breach it.34 Furthermore, SGI denies that it breached the "best efforts" provisions of Sections 6(a), (b) and (f) of the EAA, and says that Nomir ultimately agreed to virtually all the actions that it now claims constitute SGI’s failure to use best efforts.35
94.
Addressing Nomir’s claims for damages for lost or delayed royalties, SGI contends that they are barred by Section 9 of the EAA which provides that "[n]otwithstanding any other provisions and clauses of this Agreement neither Party shall be liable for...loss of revenue." In addition, SGI contends that the amount of damages claimed by Nomir is speculative, the existence of damages cannot be proven with reasonable certainty, and Nomir cannot provide a stable foundation for a reasonable estimate of the quantum of damages.36

D. The Parties' Further Delineations of Their Claims and Defenses

95.
In their Rejoinder submissions the Parties responded to each other’s factual arguments and added detail to their legal positions. Both Parties in their later submissions add the new argument that the other’s damages claim should be denied for failure to mitigate the damages.37 In addition, SGI contends that Notice of Default and Notice of Termination failed to comply with the EAA’s notice and cure requirements and breached Nomir’s duty of good faith and fair dealing.38

XII. ANALYSIS AND FINDINGS

A. TheEAA

96.
The EAA was executed by SGI and Nomir on November 21, 2014.39 It describes the MDRO Project in broad terms, stating that SGI and Nomir were to engage in a "collaboration between the two companies in the pursuit of business opportunities using the photobiological effects of laser technology for eradication of multi-drug-resistant-organisms (‘MDRO’s’) in human nasal passages and potentially in other clinical medical applications for the treatment of MDRO’s."40
97.
In Section 2(a) of the EAA, Nomir granted SGI an exclusive license to the Nomir Technology relating to the "photobiological effects of lasers" on MDROs, encompassing Nomir’s inventions and designs, patents, licensed products, licensed applications and know-how. Section 5 of the EAA describes Nomir’s responsibilities, which include providing to SGI at no charge "technical consulting assistance for hardware and software modifications to the Nomir Noveon platform, the conduct of in vitro, pilot, clinical trials and regulatory compliance."41 Section 6 of the EAA describes SGI’s responsibilities. As the party assigned the responsibility of developing and commercializing Nomir’s technology, SGI was required to undertake at its own cost the (i) hardware and software modifications to the Noveon platform, (ii) the conduct of in vitro, pilot and clinical trials, (iii) regulatory compliance, and (iv) product rollout including sales, marketing, warranty and support "as necessary to achieve the earliest possible commercialization of the NOMIR Technology and the greatest feasible amount of Net Sales Revenues."42 SGI also was required to develop "a detailed business plan" (the "Business Plan") which would include a staged approach for (i) hardware and software modifications to the Noveon platform (ii) the conduct of in vitro, pilot and clinical trials, (iii) regulatory compliance, and (iv) product rollout, including sales, marketing, warranty and support. The Business Plan was required to include "a specific but non-binding timetable for the achievement of each of the foregoing phases of activity."43 The similarities in Sections 6(b) and 6(c) strongly suggest that the Business Plan would set forth how SGI would achieve its responsibilities under Section 6(b). In addition, SGI’s responsibilities included the obligations to use "all reasonable efforts" to maximize Net Sales Revenues, and to use its "best efforts" to achieve the quarterly revenue milestones and pay Nomir the Minimum Quarterly Royalties specified in the attached Exhibit B.44
98.
Pursuant to Section 7(a) of the EAA, SGI agreed to pay Nomir quarterly royalty payments based on sales. Attached as Exhibit B to the EAA is a chart of "Minimum Forecasted Quarterly Royalties." It was understood by SGI and Nomir that this royalties forecast, prepared by Nomir, was non-binding.45 SGI stated that it could not commit to minimum quarterly royalties at that stage (negotiation of the EAA) as the Parties did not even know if they would get through the trials and regulatory approval. SGI would only commit to best endeavors to meet the forecasts.46 While Jack Kay of Nomir testified that he viewed the forecasts in Exhibit B as "conservative," he recognized that they were only forecasts.47 In summarizing for Nomir's shareholders the terms of the EAA being negotiated with SGI in September 2014, he described the revenue forecasts he had developed as "wrong", and in another communication to Nomir's investors in August 2014 he stated "it is possible this is a smoking-dope forecast."48 In any event, SGI agreed only to use best efforts to achieve the quarterly revenues in Exhibit B.49
99.
Section 9 (second paragraph) of the EAA provides:

"Notwithstanding any other provisions and clauses of this Agreement neither Party shall be liable for loss of use, loss of business, loss of revenue, or any other incidental, special, indirect, consequential loss or damages, or punitive or exemplary damages to the other Party howsoever caused."

Graeme Creamer testified that the intent of this provisions was to avoid the situation of a legal proceeding in which one party seeks speculative lost profits. Without knowing whether the science worked, whether regulatory approval would be obtained, and whether the product would succeed in the market, SGI wanted to exclude recovery of profits of any kind and avoid any potential dispute over forecasts. The provision was not in the early drafts of the EAA, and Creamer included it in one of his markups. Creamer discussed this provision in a teleconference with Kay, and, according to Creamer, Kay agreed that it was the Parties' mutual understanding that neither Party would be liable for lost profits in the event of a breach by the other. Because the EAA is a development contract, Kay said he accepted the rationale and supported the inclusion of this provision.50 Jack Kay did not remember this conversation. He testified he doubted the discussion took place, but confirmed the provision was added by SGI. Kay testified that as CEO he focuses on the business aspects of contracts and leaves legal aspects to others more appropriate.51 Creamer testified that he did not discuss Section 9 of the EAA with anyone at Nomir other than Kay, and he did not discuss the provision with Nomir's General Counsel Richard Goodkin.52 Mr. Goodkin did not provide a witness statement.

100.
Section 10 of the EAA addresses the Parties' rights to terminate the Agreement. Section 10(b) provides that SGI has the right to terminate the EAA if Nomir "fails to perform any of its material obligations under this Agreement" (and such failure is not cured within 60 days following receipt of written notice of such failure). Nomir's right to terminate is more limited. Section 10(c) provides that Nomir has the right to terminate the EAA if SGI "ceases material development and commercialization of Licensed Products pursuant to the Plan" (and such failure is not cured within 60 days following receipt of written notice of such failure). Given that SGI was expected to invest millions of dollars to develop and commercialize Nomir’s technology, providing Nomir with a more limited right to terminate makes sense.
101.
The signing of the EAA was preceded by discussions between SGI and Nomir about the MDRO Project over a period of 21 months. In February 2013, Eric Bornstein, Nomir’s Chief Scientist and Board Chairman, and Jack Kay, Nomir’s President and CEO, gave a presentation to SGI and Lasertel on Nomir’s patented "dual wave-length" Noveon laser technology. According to Creamer, Bornstein claimed that Nomir’s laser technology could weaken strains of S. aureus, including MRSA and MSSA, that are resistant to the antibiotic mupirocin. By weakening the mupirocin resistant bacteria, these bacteria would then be killed by antibiotics that would otherwise be ineffective, thus achieving S. aureus eradication while not being harmful to human tissue. The critical feature of Nomir’s laser technology was Bornstein’s claim that it worked photobiologically rather than thermally, meaning the potentiation effect was the result of light and not heat. Several weeks later, Nomir provided SGI with its "Five Year Strategic Plan" which provided additional information about Nomir’s laser technology, including a summary of human pilot studies conducted by Bornstein, and indicated that all preliminary hurdles to developing the laser for use on S. aureus had been cleared and the next step was to conduct a clinical trial, the last step before obtaining regulatory approvals. In October 2013, Nomir provided SGI with a business plan for the MDRO Project. The plan indicated that the Project was ready for a clinical trial. Meanwhile, SGI had initiated discussions with Leonardo about involving SGI’s affiliates in the MDRO Project. Nomir accepted this arrangement and included Leonardo and Lasertal in a non-disclosure agreement it executed with SGI in April 2013. SGI and Leonardo raised the possibility of testing and developing Nomir’s laser technology with UoE’s medical school, and its teaching hospital ERI. Nomir responded positively to having a prestigious medical school and teaching hospital involved in the project. At a meeting in June 2014, Nomir, Bornstein and Kay indicated they were highly receptive to the involvement of Leonardo, UoE and ERI.53
102.
Thus, well before SGI and Nomir executed the EAA, it was understood that SGI’s affiliates would be involved in the MDRO Project and that the testing and development of Nomir’s technology would be done by UoE’s medical faculty at ERI. In addition, SGI had provided a draft of the clinical trial protocol to Nomir.

B. The Business Plan

103.
While the Parties were in discussions regarding the clinical trial protocol, Nomir suggested and ultimately persuaded SGI and UoE that they should conduct a human pilot study before proceeding to the clinical trial. According to Nomir, data from a pilot study could be used in a "pre-IDE submission" to the FDA in order to get input from the FDA on the design of the clinical trial and increase the chances of the FDA accepting the results of the clinical trial in deciding whether to approve the laser for commercial use. Therefore, the parties stopped working for the time being on the clinical trial protocol, which would be resumed following successful completion of the pilot study and input from the FDA. The parties agreed that the pilot study would proceed in two phases at ERI. The first phase of the human pilot study ("HP1") would test only the efficacy of the current NHS protocol to determine its failure rate in clearing S. aureus from the nose; the second phase ("HP2") would introduce the laser in combination with the current NHS protocol to determine whether the laser had any incremental effect.54
104.
SGI’s first deliverable under the EAA was the Business Plan, which was scheduled to be delivered within 60 days of the effective date of the EAA.55
105.
Section 6(c) of the EAA provides that the Business Plan to be developed by SGI and provided to Nomir would be a detailed plan "outlining strategy and tactics in the pursuit of marketing and selling laser systems in the Field of Use and the Territory." The Business Plan was required to "include a staged approach, first addressing the European Union (‘EU’), then the United States (‘USA’) and then the Rest of the World (‘ROW’) for i) hardware and software modifications to the NOMIR Noveon platform, ii) the conduct of in vitro, pilot and clinical trials, iii) regulatory compliance...and iv) product rollout including sales, marketing, warranty and support." The Business Plan was also required to "include a specific but non-binding timetable for the achievement of each of the foregoing phases of activity."
106.
SGI delivered the draft Business Plan to Nomir on March 2, 2015. It contemplated a two-phased pilot study reflecting the Parties’ agreement to initiate a pilot study ahead of the clinical trial. The EAA required Nomir to provide input on the draft Business Plan ("any questions, comments or requested changes") after which the Parties would work together in good faith to reach agreement on the Plan.56 Nomir provided its comments in the form of a markup to the document on March 18, 2015. Nomir’s comments were minor, and after a follow up telephone call, the parties were in Agreement.57
107.
The Business Plan described the EAA as an agreement "to license and share technology for the development and commercialization of a laser system for the treatment of MRSA in affected patients via nasal decolonization."58 It included a timetable of 11 Major Project Milestones from product design through product launch and follow up FDA regulatory approvals, with dates that were non-binding as per Section 6(c) of the EAA. The Business Plan addressed the hardware and software modifications to the Nomir Noveon platform, the conduct of in vitro, pilot and clinical trials, regulatory compliance, and product rollout including sales, marketing, warranty and support. The aim of the Business Plan was to provide "a roadmap mapping out the key strategic gateways and tactical steps" relating to these areas to realize revenue through successful commercialization.59
108.
The Business Plan provided for the continuation of in vitro lab work on the Nomir laser being conducted by the Department of Microbiology at UoE. It also provided for the HP1 and HP2 studies agreed by the parties to be conducted by the UoE at the elective orthopedic clinic at ERI.60 And it provided that the formal clinical trial would be conducted at the same orthopedic clinic after the human pilot studies.61 The Business Plan made clear that the route to the market, and resulting royalties, was dependent inter alia on demonstrating efficacy and usability in clinical trials and securing regulatory approvals.62
109.
The EAA provided that the Business Plan would be based on best available knowledge at the time and subject to change as information and data matured or became available.63 "The Plan may be amended from time to time by mutual agreement of the Parties as circumstances change and as may be required to achieve the objectives of this Agreement."64 There is no evidence that the Business Plan was ever amended.

C. SGI's Efforts to Develop and Commercialize Nomir 's Technology Pursuant to the Business Plan

110.
SGI pursued the milestones in the Business Plan in parallel with independent lab work to replicate Nomir's previous work and to confirm the efficacy and safety of the Noveon laser in disrupting S. aureus. SGI completed a number of milestones before Nomir terminated the EAA.

1. Business Plan Major Project Milestones Completed by SGI

a. Milestone 1: MDRO Laser Clinical Trial Laser Design Complete

111.
The first milestone in the Business Plan required SGI to design a laser suitable for use on humans during the second phase of the pilot study and the clinical trial. At the time SGI became involved in the MDRO Project, Nomir had one MDRO laser device which was used in the lab. Altering it into a practical hand-held device built to the latest medical safety standards for use on humans required significant efforts by Selex (primarily Lasertel), including multiple rounds of testing and modifications of the laser unit.65
112.
Beginning in November 2014, Lasertel contracted with industrial design partner ATOMdesign to create and review design options for the MDRO laser, nasal tip, and touchscreens. ATOMdesign provided early design ideas for the laser in January 2015. By April 2015, ATOMdesign supplied show models, electronic prototypes for the laser’s interface, prototype wearable diffuser tips, and presentation materials regarding the laser design, all in preparation for early prototype testing which took place in Edinburgh in mid-April 2015. ATOMdesign also prepared a user questionnaire, allowing feedback from hospital personnel who would be testing the prototype. As a result of the testing and feedback, Selex learned that the plastic involved in the laser design had to be modified to withstand cleaning by hospital staff with a bleach solution.66
113.
By July 2015, the MDRO laser design was largely completed. In emails dated July 26, 2015, Kay and Bornstein congratulated McElhinney on meeting this milestone.67

b. Milestone 2: Ethics and Safety for Pilot Studies

114.
Having made improvements to the MDRO Laser and tip, Selex undertook to secure regulatory and ethical approvals to be able to conduct the human pilot studies and the clinical trial.
115.
Before commencing HP1, Selex needed to obtain ethics and R&D approvals from the South East Scotland Research and Ethics Committee ("REC") and NHS Lothian. The ethics approval was to protect the rights, safety, dignity and well-being of study participants. R&D approval refers to the approval by the hospital needed to run the study in NHS Lothian facilities, including ERI. SGI secured ethics approval on June 16, 2015, and R&D approval on July 13, 2015.68
116.
Additional regulatory and ethical approvals were required before SGI could commence HP2.

UL Approval : In mid-2015 Selex, with assistance from regulatory consultant Emergo, began seeking approval by Underwriters Laboratories ("UL") of the laser under International Electrochemical Commission ("IEC") standards for electrical safety of medical equipment. Following a series of modifications to the MDRO laser after receiving UL’s draft report, UL granted a "Notice of Completion and Authorization to Apply the UL Mark" on May 27, 2016. On July 21, 2016, UL further sent notification that all testing had been completed with compliant results. However, Lasertel learned in March 2016 that a new IEC safety standard might apply to the MDRO laser. On the advice of Emergo, SGI and Lasertel pursued a waiver of this new standard.69

NHS Lothian Medical Physics Department Approval : Selex began seeking approval from NHS Lothian's Department of Medical Physics for HP2 in September 2015. After receiving and testing the MDRO Laser and extensive correspondence with Selex, NHS Lothian sent its approval on February 9, 2017.70

REC Approval : UoE submitted the HP2 protocol to REC for approval in September 2016. After making a number of amendments, UoE received REC approval on November 25, 2016.71

MHRA Approval : In October 2016, the UK's Medicines and Healthcare products Regulatory Agency ("MHRA") requested clinical investigation notification from Selex. Following receipt of approval from NHS Lothian, Selex submitted documentation to MHRA on February 15, 2017. After requesting and receiving additional information, MHRA granted approval on May 3, 2017, after Nomir terminated the EAA.72

c. Milestone 3: CE Marking for Pilot Study Devices

117.
The third milestone concerned "CE Marking" for the MDRO Project's pilot study device. At the time of preparing the Business Plan, Selex believed that obtaining CE marking would be one of the steps required before testing the laser on humans in the second pilot study. However, Selex later learned that CE marking was only required for sales, and thus would not be necessary or possible to complete until SGI took the product to market after a successful clinical trial.73

d. Milestone 4: Assembly of Pilot Study Devices

118.
The fourth milestone was the manufacture of lasers to be used in the pilot study (and later in the planned clinical trial). In September and December 2015, Selex placed two purchase orders for a total of 12 lasers from Lasertel. These lasers were assembled by Lasertel and delivered to Leonardo in Edinburgh in installments throughout late 2015 and early 2016, except for four support units, which were kept in the U.S. until they were needed in the course of the pilot study or clinical trial.74

e. Milestone 5: Pilots Studies Commence and Usability Analysis

119.
The fifth milestone was the two phase pilot study that the Parties had agreed to do after the EAA was signed. SGI's work to achieve this milestone is described in detail in sections XII.C.2 and C.3 below.

f. Milestones 6-12

120.
Later milestones in the Business Plan were dependent on completion of the pilot studies. Given the Parties' agreement to conduct the pilot studies before the clinical trial (and to use the results of those pilots to design the clinical trial), SGI could not begin the remaining milestones until it had completed the pilot studies. Nomir terminated the EAA after the completion of HP1 and before commencement of HP2. As a result, Milestones 6-12 were not achieved.75

2. HP1

a. The HP1 Protocol

121.
SGI provided Nomir with a draft protocol for HP1 on March 19, 2015, the day after Nomir submitted its comments on the Business Plan. Nomir provided comments on the draft protocol on March 23 and March 30, 2015, which were incorporated into the draft, which was provided again to Nomir on April 17, 2015. By the end of April, the Parties were in agreement on the protocol, which was submitted to REC for approval on May 1, 2015 (see ¶115 above).76
122.
The HP1 protocol described in detail the design of the study, which was to be conducted by UoE on elective surgery patients in ERI's orthopedic department (the same location the Parties intended to use for the clinical trial). The protocol described a program "to test the effectiveness of current NHS protocols for decolonizing S. aureus prior to surgery using nasal mupirocin administration for five days plus skin washing and chlorhexidine soap and gargling with chlorhexidine mouthwash."77 The "Primary Objective" of HP1 was to "determine the eradication rates for SA" using the NHS protocol for MRSA.78 The "study population" was "patients presenting for elective implant surgery to a single large tertiary University affiliated hospital (Edinburgh Royal Infirmary), who have confirmed pre-operative nasal colonization with SA (MSSA or MRSA)."79 The number of participants to be recruited for the study was a maximum of 100 patients.80
123.
It is clear from the HP1 protocol that the HP1 study would test the effectiveness of mupirocin in eradicating both MSSA and MRSA.
124.
In addition to the study’s "Primary Objective," the protocol also described additional "Feasibility Objectives" of HP1 including determining "the likely consent rates by patients to an RCT (a randomized control trial which the clinical trial would be), as well as "recruitment rates" and "protocol compliance rates."81 The protocol also described a two-step screening process for patients to participate in the study, which included screening for S. aureus colonization by taking a nasal swab to yield a result (indicating whether either MSSA or MRSA-positive).82

b. Ethics and Regulatory Approvals for HP1

125.
Working with UoE, Selex made the necessary applications and obtained ethics and regulatory approvals in June and July 2015 (see ¶115 above). In addition, Selex and UoE negotiated and finalized a collaboration agreement in respect of the pilot studies (and the planned subsequent clinical trial), which was signed on August 14, 2015. The hospital approved the commencement of HP1 by October 2015.83

c. The Conduct of the HP1 Study

126.
Recruitment for HP1 commenced on October 20, 2015. On October 26, 2015, the first patient was successfully recruited. By December 18, 2015, HP1 had recruited only nine S. aureus-positive patients (including eight MSSA and one MRSA) out of 28 who had consented to testing and 103 who had been screened for eligibility. The HP1 protocol estimated that five S. aureus -positive patients would be recruited per week. In fact, the recruitment rate for the first eleven weeks was approximately two S. aureus-positive patients per week.84
127.
Selex kept Nomir apprised of the recruitment efforts. In February 2016, Kay raised the possibility of expanding the study to a Glasgow hospital to reach more patients. However, Creamer explained that doing so would have caused delays because HP1 was already ongoing and Edinburgh and Glasgow were administered under separate regional divisions of the NHS. Additional approvals and a separate contract with a Glasgow hospital would have been required. In the end, the Parties decided not to expand the HP1 study to Glasgow.85
128.
Consistent with the feasibility objectives stated in the HP1 protocol, UoE and Selex continued to review the data on patient recruitment and consent rates. By August 11, 2016, UoE had recruited 89 S. aureus-positive patients, including 7 with MRSA and 82 with MSSA. In a teleconference that day, Selex and UoE discussed whether, based on the consent, recruitment and withdrawal rates of HP1, it would be "feasible for us to run the Pilot 2 study." UoE concluded that: "[I]n short the answer in yes. Around 37% of screened patients were recruited. Recruitment rates are around 2 patients per week, withdrawal rates are acceptable (7.6% patient withdrawals), assay failures are around 2% and protocol compliance rates are good."86
129.
On September 12, 2016, the 100th and final patient was recruited to HP1.

d. The HP1 Study Results

130.
On December 19, 2016, the final report for HP1 was released. Out of 830 patients who were screened for eligibility, 274 consented to testing, and 100 patients tested S. aureus-positive. Of those 100 patients, 84 completed the study (5 MRSA-positive and 79 MSSA-positive). All five MRSA-positive patients were successfully treated with the NHS regimen (including mupirocin), as were 75 of the 79 MSSA-positive patients. Overall, the clearance rate was 96.2% measured with the "standard culture" that UoE used to begin the study, and 93.8% measured with the "enrichment culture" that UoE switched to later in the study.87
131.
Measured against the agreed-upon protocol, HP1 achieved its goal of determining the efficacy of the existing NHS mupirocin treatment protocol. The results, however, were disappointing from a business perspective, since a key basis for the MDRO Project was that current treatments for S. aureus colonization were ineffective, thus creating a need for a new therapy.88 The NHS treatment protocol had a far higher efficacy (and for lower failure) rate than either Party expected. Whereas Bornstein had predicted a general failure rate of 30-35%, the mupirocin treatment failed in only 6% of all MSSA/MRSA patients in HP1 and was 100% successful in treating patients who were MRSA-positive.89

3. HP2

132.
The preparation for HP2 started in November 2015, a month after HP1 had commenced. Precursors to HP2 included completing the approvals process (ethics, R&D, MHRA) and finalizing the treatment (optimized combination of laser waveform/energy density and antibiotics).90

a. The HP2 Protocol

133.
UoE prepared a first draft of the HP2 protocol in late Spring 2016 which was provided to Selex on May 6, 2016.91 This draft proposed a staged approach where the laser alone would be tested first in HP2 to be followed by testing laser plus antibiotics. The draft protocol defined the study population as patients presenting for elective surgery to ERI "who have confirmed pre-operative nasal colonization with SA (MSSA), excluding MRSA."92 In explaining this approach to Selex, Dr. Tim Walsh, a professor of UoE and chairman of the Scottish Critical Care Trials Group, stated that UoE believed the most scientifically sound path forward for HP2 would be to start with an initial laser-only leg, and then add a laser-plus-antibiotics leg later once they better understood the science behind Nomir’s claims about the laser. UoE explained that this was because the UoE microbiologists had not replicated Nomir’s experimentation or seen evidence in the lab of Nomir’s claim that the laser "potentiated" antibiotics.93
134.
On May 12, 2016, Selex provided the initial (May 6) draft HP2 protocol to Nomir. Nomir disagreed with a number of important aspects of the draft protocol. In a May 16, 2016, email to Creamer and McElhinney of Selex, Kay objected to the protocol’s laser-alone therapy which he said "will not work." He also objected to the exclusion of MRSA-positive patients, stating that "MRSA is the far more virulent pathogen our therapeutic solution will face" and "patients with this pathogen ought to be included in the study."94 Creamer responded the same day, stressing the draft HP2 protocol was "very much an initial draft," and assuring Nomir that HP2 would involve "2 arms, laser only and laser + mupirocin"95 Kay responded and, while stating that "there can be no question as to the level of commitment, support, and zeal for this project exhibited (time and time again) by Lasertel and Selex cadres in the USA" for their development of hardware and software, he expressed criticism of the UoE team’s progress and schedule delays, noting "we are at a minimum one full year behind schedule."96
135.
On June 8, 2016, Selex sent Nomir’s comments and suggestions on the draft HP2 protocol to UoE. In these, Bornstein again objected to the MRSA exclusion criterion.97 Also on June 8, Don Brown sent an email to Kay describing Selex’s "S3 (UK) Research and Development Programme," the aim of which was to develop, test and certify an approach to treating and preventing antibiotic resistant bacterial infections, "ideally without the need for antibiotics." He noted that the "Nomir thesis, and the IP underlying it," was a significant part of this evaluation work, but that the "Framework which Nomir concluded with [SGI and Lasertel]" does not guide the UK Programme. He explained that the "Nomir thesis" is only party of the overall program and there were elements of the work with Lothian Health Board and UoE which were unrelated to the Nomir IP. He added that Tim Walsh and Hamish Simpson of UoE advised that they could see "no credible market for a laser device that simply compliments mupirocin."98 Kay responded in an email to Creamer the same day expressing "angst and despair" over Brown’s email which he said disavowed both the spirit and terms of the EAA. He also described Walsh’s and Simpson’s statements as "devoid of both clinical and business merits."99 Nomir's formal response to Brown's email was an email dated June 14, 2016, to which was attached a proposed agenda for a meeting in Edinburgh on June 27-28, 2016, and a document setting forth Nomir's responses to Brown's email. In its responses Nomir (a) stated that while the laser alone notion was not new, to learn that this is a strategic aim of the program was new, and that all prior discussions with Selex were explicit that the program's aim was use of the Noveon laser to potentiate existing antibiotics; (b) said it was troubling to hear that the laser alone strategy was in the forefront of Selex's thinking because it would not work - it would in all probability fail to kill the pathogens in the nares at dosages that are safe and tolerable for humans, and once laser treatment is done it would still be required to use an antibiotic to defend against reinfection; (c) laser plus antibiotics was an augmentation to an existing standard of care protocol, whereas laser alone represents a replacement of an existing protocol and thus the FDA bar would be much higher; and (d) while Nomir held high the reputation and medical advice of the ERI medical staff, the entire product strategy should not change course due to the opinion of two such professionals.100 In the cover email, Kay wrote: "I look forward to convergence of our views when we meet in Edinburgh. I think driving to closure in Edinburgh makes more sense, as it affords us the opportunity to discuss them face-to-face in a more congenial atmosphere and where we can discuss them in real time."101
136.
The correspondence between the Parties in May and June 2016 revealed disagreements about the direction the Project was taking and the protocol for HP2. It also revealed Nomir's serious concern that Selex was focusing on laser alone rather than the laser plus antibiotic that was the subject of the Project. Ultimately, the Parties agreed to work out their issues during an "all-program" meeting in Edinburgh.102
137.
The Edinburgh meetings occurred on June 27 and 28, 2016. Representatives of Selex, Nomir and UoE attended. During the meeting, Bornstein presented a slide deck advocating inclusion of MRSA patients, and testing laser plus mupirocin rather than laser alone, in HP2. UoE explained why they had wanted to focus initially on laser alone (to be followed by laser plus antibiotics) in the absence of evidence that the laser potentiated mupirocin and in light of the very low failure rate of mupirocin being seen in HP1. UoE also explained its reasons for proposing that the study include MSSA-positive patients and not MRSA-positive ones - that proceeding first with testing the effect of the laser alone could only be done on MSSA-positive patients because the NHS protocol required the use of mupirocin on MRSA-positive ones. UoE also explained that a study including a laser-plus-mupirocin arm should include MSSA-positive patients, in addition to MRSA-positive patients, because this was the only way to secure a sufficient number of patients for statistically significant results, given that MSSA was much more prevalent than MRSA in the patients.103
138.
At the conclusion of the Edinburgh meetings, SGI, Lasterel, Leonardo and Nomir were all in agreement that HP2 would test both MRSA and MSSA patients, with MRSA as the focus of HP2, and would test both laser alone and laser plus mupirocin.104 On June 28, 2016, Don Brown of Selex (Leonardo) in an email to Kay wrote "I believe we have a clearer way forward and are in agreement regarding the priorities."105

D. UoE's Efforts to Replicate Nomir's Claims Concerning its Laser Technology

139.
In parallel with Selex's work on the human pilot studies to achieve Milestone 5 in the Business Plan, Selex had UoE perform independent testing to confirm and prove Nomir's technology worked. UoE's in vitro lab experiments with Nomir's laser were also part of the Business Plan.106

1. UoE's Lab Experiments

140.
The goal of UoE's in vitro work was twofold. First, UoE sought to replicate Nomir's previous work to confirm the efficacy of the laser in disrupting S. aureus. This involved using the laser against S. aureus to determine energy levels necessary to disrupt the bacterial cells with and without antibiotics, and determining whether exposure to the laser would "potentiate" antibiotics' effect on the bacterial cells by reversing their antibiotic resistance. The second objective of the in vitro experiments was to determine whether laser exposure sufficient to disrupt bacterial cells in the lab would be safe on humans (the "in vitro to in vivo jump"). This work was important to scope the laser output levels for the later human trials.107
141.
Initially, UoE's results were cause for optimism. When the Business Plan was prepared in March 2015, it noted that "[t]he photobiological effect observed by Nomir has been replicated by UoE" and "[t]he photobiological effect has also been confirmed to eradicate biofilms."108 However, this initial optimism was short lived. Continuing their in vitro work, UoE scientists observed that the laser's effect on S. aureus was correlated with temperatures that would be unsafe for humans. This raised questions not only about whether the treatment would be safe for patients, but also whether the laser worked photobiologically or thermally.109
142.
In an interim six-month report prepared by UoE and provided to Selex on June 16, 2015, UoE summarized its review of Bornstein's prior lab work and the independent lab work that it had completed to date. UoE summarized its findings which differed from Bornstein's claims. It found that the optimum laser dose for killing S. aureus in vitro caused a temperature increase which is prohibitive for use in patients. The report said Nomir’s prior work on the possible mechanisms of bacterial killing appeared to be largely based on speculation. The report stated that UoE planned another six months of work, which would include assessing the thermal properties of the nose in response to laser treatment and confirming the impact of radiation on bacteria in vitro to confirm the mechanisms of killing.110
143.
By late July 2015, UoE summed up its findings, saying "[h]eating has always been an issue here, and with the contribution of the concurrent rise in temperature to killing unknown" and

"Two different doses are presented: an effective in vitro killing dose and a safe in vivo dose. The effective dose [for in vitro killing] is demonstrably unsafe [in vivo, i.e. on human patients], and the efficacy of the safe dose [on human patients] is unconfirmed..."111

144.
On August 4, 2015, Selex, Nomir and UoE met in Edinburgh to review the results of UoE’s research. The slide presentation prepared for the meeting was provided to Nomir about a week before the meeting, and Nomir provided written responses. The slides presented the work UoE had done, how it thought the laser worked on S. aureus, what was unclear or unproven, and the outstanding issues to be pursued.112 In written comments on the slide presentation, in comments at the meeting and in written comments after the meeting, Nomir was very critical of UoE and its work. On July 30, 2015, Kay in responding to the slide presentation said Nomir saw "a fundamental lack of comprehension as to the science and clinical medicine of [Nomir’s] mechanism of action."113 In an August 19, 2015, email Kay said Selex and UoE "simply lack the required multi-disciplinary depth."114 Central to Nomir’s complaints was its view that UoE was focusing its research on MSSA rather than MRSA. On October 12, 2015, Kay expressed Nomir’s frustrations: "We fail to understand why MSSA is being used instead of MRSA. Commercial mupirocin has 5,000 times the dose needed to kill MSSA. MRSA and biofilm represent the win for us. That is what needs to be studied."115

2. Nomir’s Experiments at Blue Sky

145.
Frustrated with the results of UoE’s in vitro lab work and cognizant that the UoE researchers were reaching different results than Nomir had claimed, Nomir undertook separate lab work at Blue Sky BioServices ("Blue Sky"), a contract research organization based in Worcester, Massachusetts, at its own expense.116 Kay informed Selex that the testing was being done "in an attempt to bring the in vitro dose successfully closer to the in vivo dose...and to further refine [] human dosing parameters for Human Pilot Two."117 Through these experiments Nomir sought to address the potential problem that UoE had identified - that an effective in vitro dose was unsafe for human use, and that a safe in vivo dose was ineffective in vitro.118
146.
The Blue Sky laboratory work began in December 2015 and proceeded over a period of five months. As part of the work at Blue Sky, Nomir tested four mupirocin-resistant strains of MRSA. Nomir also created an experimental set-up that simulated the conditions in the human nose (referred to as an "artificial nostril") to test the mupirocin-resistant strains of MRSA and whether lower laser dosages that were safe in vivo would also be effective in eradicating MRSA in the laboratory.119
147.
On March 3, 2016, Nomir sent Selex a slide deck describing some of the Blue Sky work and results. On March 8, 2016, the Parties met in Edinburgh where Bornstein presented the methodology and findings of the Blue Sky work to Selex and UoE.120 Even before the March 8 meeting, Kay had written to Selex saying that Bornstein's Blue Sky work had "produced some truly astounding results" and that Bornstein's results at Blue Sky "show[ed] an ability to knock down most virulent MRSA strains at far lower power settings than tried in Edinburgh."121
148.
The Parties are in disagreement whether the Blue Sky work was supposed to be done by Blue Sky scientists working independently or by Bornstein working with Blue Sky scientists. According to Selex, the work needed to have sufficient academic rigor by being "independent and credible" to use as the rationale for proceeding to HP2.122 According to Nomir, requiring the Blue Sky work to be independent is "absurd" and not required for regulatory approval.123 However, it is not disputed that Bornstein led the work at Blue Sky. The growth, development, biofilm and antibiotic susceptibility tests were conducted by Blue Sky scientists; and Bornstein operated the laser and collected the data.124
149.
At the March 8 Edinburgh meeting, Selex and UoE proposed that UoE try to replicate at least a subset of Nomir's Blue Sky work to eliminate any variable that could be affecting the outcome and clearly establish the impact of the laser on S. aureus. Nomir initially resisted having UoE attempt to replicate the Blue Sky work, calling it "unnecessary," but ultimately relented.125 Bornstein prepared and provided detailed protocols to Selex for the experiments and shipped to UoE five custom-fabricated artificial nostrils to assist UoE in duplicating the Blue Sky lab work.126

3. UoE's Work to Replicate Nomir's Blue Sky Results

150.
By May 25, 2016, UoE researcher Peter Gwynne had set up experiments using the artificial nose chambers and in vivo laser unit Bornstein used at Blue Sky and following the protocols provided by Bornstein. UoE's results, however, did not confirm those reported by Bornstein. UoE observed that "[d]uring the course of treatment... the diffuser tip and chamber were subject to a significant heat rise," which resulted in the killing of S. aureus. According to UoE, "[t]his suggests that the significant killing seen by Nomir [] may have been caused by a heating effect, if the chambers used were towards the higher end of the heating range observed here."127 In addition to demonstrating that delivery of laser light into the Nomir artificial nose chamber caused bacterial killing, UoE tests also demonstrated that this killing was replicated in the absence of the laser by recreating the temperature in the chamber, which suggested that the observed killing was the result of temperature rather than the direct effect of the laser. UoE carried out further experiments to control for the effect of heat by using a cooling chamber and observed that when the temperature was kept lower, no reduction of cell count was observed when the laser was used.128
151.
Nomir had a very negative reaction to UoE's test results. On June 14, 2016, Kay wrote to Selex saying "[a]s to Peter Gwynne's two papers, I am astounded! He is telling his audience that our laser does not work as advertised, and that there is no photobiological effect, and that the heat is doing the killing. To state that Peter is in error is to be far more polite and PC than the situation demands."129 Nomir's "official response" to Gwynne's work and results on June 17, 2016, stated the "undeniable truth [is] that Peter's work and the conclusions he draws from it are worthless and devoid of any scientific merit of any kind whatsoever."130 Among other things, Nomir claimed that Gwynne made three fundamental errors in experimental methodology.131 UoE prepared a detailed response for Selex addressing each of the alleged errors, concluding that they were not errors at all, or immaterial or both.132 Selex elected not to provide this response to Nomir. According to Selex, it believed the better course was to allow UoE to continue testing Nomir's theories without prolonging the debate with Nomir while also, in parallel, continuing to progress the human pilot studies.133

E. nomir’s notice of Default and notice of Termination

152.
In June 2016, the MDRO Project was at a critical stage. Selex and Nomir had received from UoE a summary report on the HP1 study in March 2016 and a summary of HP1’s interim results in June 2016. Selex and Nomir were studying and discussing these reports and the implications of the HP1 results for HP2 and the future clinical trial. At their meetings in Edinburgh on June 27 and 28, the Parties agreed on the protocol for HP2 that would test both MRSA and MSSA patients and run tests of both laser alone and laser plus mupirocin after extensive discussion of these issues in correspondence preceding those meetings and at the meetings. Only recently the Parties had disagreed about the need for UoE’s in vitro lab work to confirm Nomir’s claims about its laser technology and the results of Bornstein’s Blue Sky work, and about the results of UoE’s lab work. The UoE lab work would continue, but it and Selex’s interest in laser alone would remain sources of friction between the Parties.

1. The July 15, 2016, Emails Between Nomir and Selex

153.
On July 15, 2016, just over two weeks after the Edinburgh meetings, Kay wrote in an email to Creamer and McElhinney of Selex "based upon the most recent meetings in Edinburgh, is it not true that the laser alone strategy has been abandoned?" Creamer responded in an email of the same day saying "no, laser only has not been abandoned [;] a pulsed approach is being investigated." In response, Kay wrote: "I am dumbfounded to discover that the laser alone strategy still has any currency among the Selex ES staff in Edinburgh. It is a continued waste of resources and time, when both are in finite supply." Creamer responded saying: "the work they [UoE] are undertaking is not getting in the way of what we are doing and will not take away MRSA patients and is not coming from the same budget. I can potentially see a pulsed laser and mupirocin solution which might be derived from pulsed testing they are looking to tinker with. Rest assured they don’t have a pulsed laser that can do anything other than lab work."134 Creamer points to Kay’s July 15 emails as the beginning of Nomir’s questioning the agreement on the HP2 protocol reached at the Edinburgh meetings.135

2. Nomir and Selex Consider Expanding the HP2 Study to Include More MRSA Patients

154.
In addition to reaching agreement on the HP2 protocol at the Edinburgh meetings, the Parties were in agreement that it was desirable to recruit more MRSA patients for HP2. According to Kay, "the main outstanding issue at the end of the June 27 and 28 meetings was how Selex would include more MRSA participants in the human pilot study."136
155.
The difficulty in recruiting MRSA patients for the human pilot studies and the clinical trail was well known to the Parties. The Parties knew from the start that there would be relatively few MRSA-colonized patients but many MSSA-colonized patients in the orthopedic department of ERI. The draft clinical trial protocol prepared by UoE before the Parties decided to first conduct human pilot studies showed that MRSA carriers were relatively rare in the elective orthopedic population of ERI.137 UoE provided information detailing the number of MRSA cases at ERI, the relative incidences of MRSA and MSSA, and the results of a 200-patient epidemiological study of MRSA and MSSA colonization rates at ERI's elective surgery unit.138 The number of MRSA patients recruited for HP1 was consistent with the Parties' expectations when they made the decision to conduct the pilot studies at ERI's elective orthopedic surgery unit.139
156.
Having seen the patient recruitment results of HP1, Nomir was pressing Selex to recruit more MRSA patients for HP2. According to Selex, the Parties left the June Edinburgh meetings with "an agreed action plan" to address the difficulties of getting more MRSA patients. Selex, working with UoE, would consider ways to increase the MRSA patient population at ERI, while Nomir would look into pursuing a study in New York City and to look into how other pharmaceutical companies dealt with seeking approval of MRSA treatments given the difficulty of recruiting MRSA patients for clinical trials.140 Nomir takes issue with Selex's description of a "division of labor."141 However, the evidence amply supports that Nomir undertook to explore expanding HP2 to New York City to increase the number of MRSA patients, and Selex undertook to explore how to increase the MRSA patients in Edinburgh.

a. Selex's Efforts to Expand the Recruitment of MRSA Patients in Edinburgh

157.
Following the June Edinburgh meetings, concurrent with amending the draft HP2 protocol to include all of the treatment arms and patient groups agreed upon, Selex worked with the experts at ERI to explore ways to increase the number of MRSA patients on whom it could test the laser-plus-mupirocin treatment. To supplement HP2 with additional MRSA patients, Selex considered studying MRSA-positive hospital personnel, recruiting MRSA patients from non-orthopedic departments at ERI, and finding heathy volunteers from Selex employees or other groups of Edinburgh residents, including UoE students.142
158.
The suggestion of supplementing HP2 with a study of MRSA-positive hospital personnel was rejected by Dr. Bornstein on the ground that hospital workers were more likely to carry Hospital-Acquired MRSA ("HA-MRSA") than the general population, and he was more interested in studying Community-Acquired MRSA ("CA-MRSA").143
159.
Dr. Walsh of UoE was skeptical of Selex's proposal to expand HP2 to ERI departments outside the orthopedic clinic in part for the same reason Selex and Nomir decided to conduct the clinical trail and HP1 with only ERI elective orthopedic patients; focusing the study on healthy orthopedic patients would produce stronger and more reliable data than using other patients (such as renal, medicine of elderly, etc.) which would introduce many potential effect modifiers to the efficacy of the treatment, plus a more heterogeneous population with many co-morbidities.144 Dr. Walsh also pointed out that ERI sees only a small number of new MRSA cases and they are in diverse patient groups and locations such that a trial of only MRSA patients would be "under-powered, inconclusive, and almost impossible to undertake and interpret."145
160.
Dr. Walsh was also skeptical of Selex's suggestion of soliciting volunteers among Selex employees. He believed such a study would pose ethical issues. It would also "take as long, cost much more, have higher risk of not finding cases, have no scientific meaning that we can see, and not progress the programme in the bigger picture."146
161.
Ultimately, Selex and Dr. Walsh agreed that it would be possible to use volunteer recruitment as a second front for finding MRSA patients concurrent with HP2. In an email to Selex dated October 6, 2016, Dr. Walsh wrote: "From our discussions we concluded that a way forward may be: 1. Continue with pilot II as proposed and budgeted...2. A volunteer study, which could be done from a range of volunteer groups including healthcare workers, university students, military (we have contracts), and possibly other groups." He observed "[t]his can generate some MRSA data which seems important, but will not achieve numbers with great clinical or statistical significance." Concluding, he wrote: "in short we suggest: 1. Push ahead with pilot II and get the ethics and agreements signed off. 2. Start designing the volunteer study and cost it with the arm of obtaining the MRSA case series."147 Selex did not ultimately carry out this plan for recruitment outside of ERI's orthopedic patients because of the termination of the EAA by Nomir.148

b. Nomir’s Efforts to Expand the Recruitment of MRSA Patients in New York

162.
After the June 2016 Edinburgh meetings, Nomir explored additional or alternative sites in New York for the HP2 study.
163.
On July 15, 2016, Nomir reached out to Dr. Yosef Krespi, an otolaryngologist in New York who had worked with Nomir on a pilot study in 2008, and discussed collaborating with him to conduct a human pilot study with 50 MRSA decolonization failure patients. After Bornstein discussed with Krespi the feasibility of such a study with his patients, Kay spoke with Krespi to discuss the potential commercial terms of a collaborative study.149 On August 11, 2016, Kay informed Creamer and McElhinney that Nomir had negotiated a non-disclosure agreement with Krespi, and that Bornstein would begin "parameterizing the study in terms of deployed assets, timelines and cost."150 Selex requested scientific data substantiating Nomir’s view that Edinburgh was demographically insufficient for HP2 and that New York would, in contrast, supply suitable patients in adequate numbers.151 In response, on August 12, 2016, Nomir sent Selex a white paper prepared by Bornstein.152 In the covering email, Bornstein wrote: "As you will see in the whitepaper, there is really no question as to the overwhelming data and logic behind my statements about the Edinburgh demographic challenges, and the utter and complete superiority of NYC as the alternative."153
164.
In Selex’s view, the white paper did not support Bornstein’s claims.154 In response to the white paper, Selex’s McElhinney wrote to Nomir on August 12: "Unless I am missing it, I don’t see a direct comparison of infection rates or patient throughput. These are the numbers we need to make a case."155 It appears Nomir did not respond to this email, at least not directly.156
165.
In an exchange of emails on September 14, 2016, setting the agenda for the Parties’ "regular every other Wednesday afternoon phone call," the first item on the proposed agenda was: "Status of the development of the Parexel ‘get well plan,’ including, but not limited to:...b. The utility of a parallel testing of MRSA failure cases from Joe Krespi’s patient list." Under this agenda item, Kay wrote: "1.b Parexel, should their plan be agreed to by Selex, obsoletes the need for Joe Krespi as the MD principal investigator. Parexel has many PI's in their stable. We could go to Krespi and conduct what I will call a ‘quick and dirty' study of as many of his 40+ ‘MRSA failure' patients as we could. These patients would all need to be retested, so as to ensure not only the continued presence of MRSA, but also to properly characterize the type of MRSA they may now have. There would be no statistical benefit to this 1.b effort." In response, Creamer asked: "Do you have any proposals and robust plans from Parexel and Krespie?" Kay responded: "Eric [Bornstein] has been hard and intensively at work with Parexel to develop the HP1/HP2 get well plan. They are scheduled to deliver a comprehensive statement of work (SOW) to us tomorrow...As to Krespi, we do not have a robust plan as I first wish to understand if it is something you want as I outlined above."157
166.
About this time, Nomir appears to have abandoned any plan to work with Krespi in New York to augment the HP2 study. No Krespi proposal was ever provided to Selex.158 From this point, Nomir focused its New York efforts on Parexel. On September 19, 2016, Kay wrote to Creamer and confirmed Nomir had received the Parexel proposal and that he hoped to give it to Selex "very soon, possibly before the end of this week."159 However, Nomir did not provide Selex with a proposal from Parexel.160
167.
The proposal that Nomir received from Parexel dated September 15, 2016 (the "Parexel Proposal") indicated that Parexel had identified 18 sites in New York that would have the capability to run trials like the ones Nomir was requesting based on Parexel's recent experience working at those sites. To determine the suitability of any particular New York hospital would require "site outreach." The study Parexel proposed would need to extend even beyond all of the 18 sites. To capture the number of MRSA patients Nomir was seeking, Parexel proposed going to 20 different sites for HP1 and 30 different sites for HP2. Parexel anticipated that it would take 3 years and $11.5 to $13.3 million to complete the two pilots, and that was based on a plan to run HP1 and HP2 simultaneously rather than sequentially (which Nomir had acknowledged was preferred for approaching regulators).161
168.
Nomir was very troubled by the Parexel Proposal. In an internal email to Bornstein about the Proposal on September 16, 2016, Kay described the Proposal as a "non- starter."162 Commenting on the Proposal, Bornstein said that the costs "should be significantly less, with fewer targeted sites for the study" and that the study would take "[w]aaaayyyyyyy to [sic] long"163; Kay said "the number of sites, timeline, and costs seem way too high."164
169.
On September 21, 2016, Nomir wrote to Parexel expressing "concerns" about the Parexel Proposal that needed "to be voiced and discussed with your group" and the "need to rework some areas of the presentation before we are able to send it to [Selex]." The letter went on to say "[s]imply put, the $13 million estimate (on the high side) is a far greater amount of money for these pilot trials than we estimated... The single operational approach (to Nomir) to combat and lower these cost drivers is to cut down on the number of clinical sites."165
170.
Nomir's response to the Parexel Proposal led to Parexel delivering a revised proposal to Nomir dated September 30, 2016 (the "Revised Parexel Proposal"). There were two versions of the Revised Parexel Proposal: one version that responded to Nomir's specific comments, and a clean version with updated text intended to be shared with Selex.166 In the Revised Parexel Proposal, the enrollment periods were cut from 24 months to 5 for HP1, and from 24 months to 7 for HP2. Parexel decreased the enrollment sites from 20 to 8 in HP1, and from 30 to 15 in HP2 (without explaining how the same number of MRSA patients would be enrolled).
171.
On October 10, 2016, Bornstein wrote back to Parexel, thanked them for the new proposal and said, "we are getting much closer to a version that I can deliver to Selex."167 Nomir did not provide Selex with the Revised Parexel Proposal, and there is no evidence in the record that Parexel prepared a subsequent proposal.
172.
The Parties disagree about why Selex was never provided with either Parexel Proposal. Selex argues that it was because Nomir recognized the Parexel Proposal was a non-starter, would take far too long and was far too expensive for a pilot study. Nomir contends that Selex did not receive the Revised Parexel Proposal because Selex was required by Parexel to sign a non-disclosure agreement before receiving the Proposal and Selex failed to do so. Selex responds that the non-disclosure agreement was not a Parexel requirement but one imposed by Nomir to make it more difficult for Selex to obtain the proposal, and that due to a miscommunication between Selex and Parexel, Selex did not sign the non-disclosure agreement. Putting aside who was responsible for Selex not receiving the Revised Parexel Proposal, the fact is that Nomir undertook to come up with a plan to augment the HP2 study in New York, and Nomir never presented Selex with such a proposal.

c. Selex’s Search for Ways to Use Data from MSSA Patients to Supplement More Limited MRSA Data

173.
In addition to searching for ways to increase the number of MRSA-positive patients in Edinburgh to participate in the HP2 study, Selex searched for a way to use data from MSSA patients to supplement the more limited MRSA data.
174.
Based on their experience in HP1, UoE extrapolated that it could take 56.5 months to secure 24 MRSA-positive patients in HP2. As an alternative, Selex and UoE considered a way to "socialize an MSSA to MRSA link with the FDA." This meant exploring whether the FDA would agree that the efficacy of Nomir’s laser technology would be expected to be comparable between MSSA-positive patients and MRSA-positive patients such that the relative scarcity of available MRSA-positive patients in the pilot could be compensated by the use of MSSA-positive patients.168 This theory was discussed at a UoE-Selex meeting on August 11, 2016, where the potential use of MSSA as a "proxy" for MRSA was discussed.169
175.
In furtherance of this idea, in December 2016 UoE microbiologists prepared a paper in which they provided a scientific rationale for why MSSA could be used as a proxy for MRSA in HP2. The paper explained that MRSA and MSSA are very similar, with greater than 99% of the same DNA. The main difference is their responsiveness to methicillin (the "M" in MSSA and MRSA) and its class of antibiotics. Mupirocin, in contrast to methicillin, impacts MSSA and MRSA in the same way, and they both can develop resistance to mupirocin in the same way. The UoE microbiologists believed it was unlikely Nomir’s laser technology would work differently on MSSA and MRSA, and UoE hoped it could design in vitro experiments to confirm this. The paper also noted that major studies of S. aureus include patients with both MRSA and MSSA, thus supporting the use of both in HP2.170

3. Finalization of the HP2 Protocol

176.
After the June 2016 Edinburgh meetings, Selex worked to amend UoE’s initial draft HP2 protocol to include all the treatment arms and patients groups that had been agreed upon at the meetings. On August 9, 2016, Lasertel provided to Leonardo Nomir’s detailed proposal for treating patients in the laser-plus-mupirocin arm of HP2. Leonardo then edited the draft HP2 protocol to reflect the treatment regimen as detailed by Nomir. Leonardo sent these edits to UoE on August 30, 2016. UoE accepted all of the edits on the draft HP2 protocol.171
177.
By the fall of 2016, the HP2 protocol was finalized. The final HP2 protocol provided for UoE to study the effect of the laser plus mupirocin on 30 patients, both MRSA-positive and MSSA-positive, following the steps detailed by Nomir. The protocol also provided for a laser alone arm. It was consistent with the Parties' agreement on the HP2 protocol in Edinburgh in June.172
178.
UoE submitted the protocol for ethics approval, addressed recommendations from the ethics committee, and was expecting to move forward with HP2 when the EAA was terminated by Nomir.173

4. Nomir Serves a Demand Letter on SGI.

179.
On August 2, 2016, at the end of a meeting to discuss progress on the MDRO Project, Kay handled Creamer a draft letter making a "settlement demand" for alleged breaches of the EAA (the "Draft Demand Letter")174 The Draft Demand Letter made numerous allegations of errors and omissions by Selex on the Project which Nomir attributed to incompetence or malice or both on the part of Selex. Nomir alleged that SGI had "consistently failed" to meet its obligations under the EAA. Nomir claimed that Selex's actions caused it a permanent loss of over $18.5 million in royalties under the EAA. Kay described this letter as not "an official communication" at that time, but an expression of Nomir's position and intent.175
180.
On September 2, 2016, Nomir served SGI with a formal Demand Letter (the "Demand Letter") which repeated most of the same allegations as the Draft Demand Letter. The Demand Letter claimed five main grounds on which SGI had breached the EAA:

1) SGI breached the EAA by transferring its contractual responsibilities to its affiliate Leonardo without authorization.

2) SGI breached the EAA by conducting unnecessary and improper research in Edinburgh, resulting in delays to the MDRO Project.

3) SGI breached the EAA by using Edinburgh as the sole venue for the two human pilot studies, despite repeated warnings from Nomir.

4) SGI breached the EAA by pursuing a laser-alone strategy.

5) SGI breached the EAA by assigning to Lasertel inventions that were rightfully Nomir's.

Nomir stated that it anticipated damages of almost $150 million.176

181.
Selex responded to the Demand Letter on September 16, 2016, stating it did not agree with the content which was "factually and legally flawed." Selex noted that the Demand Letter stated it was not a notice of default under the EAA or a written notice to resolve a dispute, and that Selex saw no value in responding in any detail at that time. Selex, however, did propose that the Parties meet as soon as reasonably possible to discuss the matter in detail and how best to continue to work together on the Project. For the avoidance of doubt, Selex rejected Nomir’s allegations of breach of contract and claim for damages.177
182.
Notwithstanding the Demand Letter, the Parties continued to work towards the launch of the HP2 study and to explore ways to increase the number of MRSA-positive patients.

5. Nomir's Termination of the EAA.

183.
On November 28, 2016, Nomir sent SGI a formal Notice of Dispute pursuant to Section 11.3 of the EAA (the "Notice of Dispute") incorporating the Demand Letter of September 2, 2016.178 Summarizing the allegations in the Demand Letter, the Notice of Dispute described 11 categories of breaches of the EAA and claimed damages of "no less than $149.6 million." Notably, neither the Demand Letter nor the Notice of Dispute claimed that SGI had ceased material development or commercialization of Nomir’s technology pursuant to the Business Plan. The Notice of Dispute triggered the dispute resolution provision in Section 11.3 of the EAA, providing for attempts at conciliation and mediation before arbitration.
184.
SGI responded to the Notice of Dispute on December 15, 2016, addressing each of Nomir’s alleged breaches of the EAA in its Demand Letter (incorporated into the Notice of Dispute) and accepting Nomir’s proposal to pursue mediation.179
185.
Without responding to SGI’s December 15, 2016, letter, on January 6, 2017, Nomir sent SGI a Notice of Default pursuant to Section 10(c) of the EAA (the "Notice of Default"), asserting if SGI’s alleged defaults remained uncured for 60 days, Nomir would have the right to terminate the EAA.180 The Notice of Default alleged that SGI had ceased making progress implementing the four phases of the Business Plan ((1) hardware and software modifications to the Nomir Noveon platform, (2) the conduct of in vitro, pilot and clinical trials, (3) regulatory compliance, and (4) product rollout) in eight respects and thus had ceased material development and commercialization of the Licensed Products pursuant to the Business Plan.
186.
SGI's counsel responded to Nomir's counsel on February 1, 2017, and again on March 3, 2017, refuting Nomir's claims.181
187.
On March 17, 2017, Nomir terminated the EAA "with immediate effect" pursuant to Section 10(c) of the EAA (the "Notice of Termination"). The Notice of Termination referred to the Notice of Default and Section 10(c) of the EAA which gives Nomir the right to terminate the EAA if Selex ceases material development and commercialization of Licensed Products pursuant to the Business Plan and such failure is not cured within 60 days following written notice. The Notice of Termination went on to allege that the HP1 final report provided to Nomir on March 7, 2017, showed that HP1 failed to produce any usable data for the design of HP2 or any subsequent trial and thus corroborated Nomir's conclusion that "SELEX has made and is making no progress on the human trials necessary to commercialize the NOMIR Licensed Products according to the SELEX Plan."182
188.
After further communications between the parties about the Notice of Termination, SGI filed its Demand for Arbitration, dated May 26, 2017.183

XIII. CONCLUSIONS

189.
The Tribunal has considered carefully the Parties' arguments and the evidence presented both in documentary form (i.e. witness statements, expert reports and exhibits) and at the hearing. This Final Award refers to the facts and law which the Tribunal finds relevant for the purposes of determining the disputed issues in this arbitration. That a particular argument is not expressly referred to in this Final Award does not mean that it was not considered by the Tribunal. The Parties' respective positions have been considered and discussed carefully and at length by the Tribunal.

A. DidSGI Cease Material Development of Nomir's Technology Pursuant to theBusiness Plan?

190.
The central question in this arbitration is whether SGI ceased material development of Nomir's Technology pursuant to the Business Plan thus entitling Nomir to terminate the EAA.

1. SGI's Position

191.
SGI contends that Nomir's right to terminate the EAA was very limited. Nomir could terminate the EAA only if SGI ceased material development and commercialization of Nomir's Technology pursuant to the Business Plan. According to SGI, its work on the MDRO Project must be evaluated by reference to the Business Plan, and "material" development and commercialization must refer to progress in achieving the Major Project Milestones set out in the Business Plan. SGI never ceased the development of Nomir’s Technology needed for regulatory approval and commercialization and pursued the Business Plan milestones up until Nomir terminated the EAA in March 2017.184

2. Nomir’s Position

192.
Nomir contends that it was entitled to terminate the EAA even if SGI was still undertaking activities to develop Licensed Products pursuant to the Business Plan, if such development was not of "real importance" or having "great consequence." According to Nomir, "material" development must refer to the overall objective of the Project which was the development of a therapy for MRSA patients using a "laser-plus-antibiotic product." Activities directed to the development of a laser-alone product that could be used only on MSSA patients do not satisfy this requirement. The fundamental objective was testing and demonstrating that Nomir’s technology worked on MRSA patients, not MSSA patients. According to Nomir, formalistically following the Business Plan, while making no progress to achieve the main goal of the Project, does not constitute material development pursuant to the Business Plan. Chief among SGI’s failures was the failure to expand the human pilot study beyond ERI where there were clearly insufficient MRSA patients.185

3. Section 10(c) of the EAA

193.
The analysis of Nomir’s right to terminate the EAA must begin with Section 10(c) of the EAA, which states:

"NOMIR shall have the right to terminate this Agreement if SELEX ceases material development and commercialization of Licensed Products pursuant to the Plan and such failure is not cured within sixty (60) days following SELEX’s receipt of written notice of such failure."

The "Plan" refers to the "Business Plan."186 "Licensed Products" refers within the Field of Use (i.e. human nasal decolonization of MDROs) to products or uses claimed or embodied in a licensed patent or patent application or products or uses utilizing Nomir Technology.187

194.
The Parties agree that "cease" means to bring to an end.188 The Parties also agree that the term "material" should be given its ordinary, plain meaning.189 Neither Party has pointed to any special industry usage or legal construction of "material." The Tribunal accepts that material equates with "significant" or "essential" or "having real importance."
195.
Having considered the positions of the Parties on the proper interpretation of Section 10(c) of the EAA and their arguments supporting their interpretations, the Tribunal is of the view that Claimant's is the correct interpretation.
196.
The Business Plan is an important element of Section 10(c). The Parties agree that "material development" must be measured by reference to the Business Plan.190 The preparation of a Business Plan was mandated by Section 6(c) of the EAA and was required to establish a staged-approach for (i) hardware and software modifications to Nomir's Noveon laser, (ii) the conduct of in vitro, pilot and clinical trials, (iii) regulatory approvals and compliance, and (iv) product rollout including sales, marketing, warranty and support. It covers the entire range of activities in the MDRO Project from initial development activity through the commercialization and product rollout. It was the product of joint input from the Parties and was an agreed Plan. Central to the Business Plan are the eleven Major Project Milestones. They cover the hardware and software modifications to the laser; the in vitro lab work, human pilot studies and clinical trial; regulatory approvals and compliance; and manufacturing and product launch—the specific elements of the Business Plan required by the EAA. In the view of the Tribunal, material development and commercialization pursuant to the Business Plan should be measured by examining SGI's progress in achieving the Major Project Milestones.
197.
Respondent's interpretation of Section 10(c) measures material development by reference, not to the Project work and milestones in the Business Plan, but to the overall objective of the Project. The obvious difficulty with this is it is inconsistent with the text of Section 10(c), which says "development...pursuant to the [Business] Plan, "not "pursuant to the objective of the Project." As a matter of contract interpretation, Claimant's interpretation is more faithful to the text of the EAA.
198.
Claimant's interpretation also makes better commercial sense. Measuring SGI's development progress with achieving Major Project Milestones provides a clear and objective standard of measurement. Measuring progress against the overall objective of the Project injects subjectivity and uncertainty into the exercise of the termination right in Section 10(c). Such subjectivity and uncertainty would lead to the very kind of dispute that gave rise to this arbitration. Nomir's concerns about achieving the overall objective of the Project, and its frustration with what it saw as Selex's greater interest in laser alone than laser plus mupirocin, are well documented in the evidence. However, Nomir's proffered interpretation of material development cannot be accepted as the basis for measuring progress pursuant to the Business Plan.

4. SGI's Pursuit of the Business Plan Milestones

199.
SGI achieved Major Project Milestones 1, 2 and 4. Milestone 3, "CE Marking for Pilot Study Devices," initially thought to be required before testing the laser on humans in HP2, turned out to be required only for sales and would not be necessary or possible to complete until SGI took the product to market after a successful clinical trial. As for Milestone 5, SGI completed the first half of it by completing HP1. The second part of Milestone 5 was completion of HP2.191
200.
SGI's work on, and progress toward completion of, HP2 is well documented in the record. The initial draft protocol was prepared by UoE in late Spring 2016. It was provided to Selex and Nomir in the first half of May 2016. Selex and Nomir exchanged comments and views about the initial draft which made clear that Nomir disagreed with important aspects of it. Eventually the Parties agreed to work out their issues about the design of HP2 during "all-program" meetings in Edinburgh on June 27 and June 28, 2016. Presentations were made, and the issues were thoroughly discussed. By the conclusion of the Edinburgh meetings, Selex (SGI, Lasertel, Leonardo) and Nomir were in agreement on the design and essential aspects of the protocol for the HP2 study: it would test both MRSA and MSSA-positive patients, with MRSA as the focus of the study, and it would test both laser alone and laser plus mupirocin.192
201.
After the Edinburgh meetings, Selex worked to amend UoE's initial draft of the HP2 protocol to include what had been agreed at the meetings and to obtain the necessary approvals to allow HP2 to go forward. The revised protocol also included Nomir's detailed steps for treating patients in the laser-plus-mupirocin arm of the HP2 study. By the fall of 2016, the HP2 protocol was finalized, except for any changes required as a result of obtaining ethics approvals. Consistent with the Parties' agreement, the protocol provided for a study of both MRSA and MSSA-positive patients and both laser-plus-mupirocin and laser alone arms of the study. UoE submitted the HP2 protocol for ethics approval, and SGI submitted and obtained other necessary approvals. REC approval was obtained in November 2016, NHS Lothian Medical Physics Department approval was obtained in February 2017, and UL authorization was received in May 2016. UoE submitted documentation to obtain MHRA approval on February 15, 2017, and provided additional information at MHRA's request. MHRA granted approval on May 3, 2017, after Nomir terminated the EAA.193
202.
When Nomir terminated the EAA, SGI was ready to proceed with HP2 and was only awaiting the final approval from MHRA. HP2 did not go forward because Nomir terminated the EAA. Later Major Project Milestones in the Business Plan were dependent on completion of the pilot studies of Milestone 5. Nomir's termination of the EAA prevented SGI from completing Milestone 5 and from achieving Milestones 6-12.

5. Nomir’s Complaints About SGI’s Performance

203.
Nomir asserts a number of complaints about SGI’s performance in support of its allegation that SGI ceased material development of Nomir’s technology pursuant to the Business Plan.

a. Selex and UoE Pursued a Laser-Alone Product Strategy Not Contemplated in the Business Plan

204.
Nomir contends that Leonardo (Selex ES) and UoE, rather than SGI, controlled the direction of the Project, and they decided to pursue work on a laser-alone therapy, which was outside the scope of the Business Plan. In support of its contention Nomir points to Leonardo’s Scottish Enterprise Grant Application which it says describes a three-year program for research broader than studies described in the Business Plan and included references to a laser-alone therapy. Nomir also points to internal communications among Selex entities and UoE about laser-alone testing, to references in documents and testimony to a laser-alone strategy, and to UoE’s interest in treating MSSA with laser-alone.194
205.
First, Nomir knew from the outset, even before signing the EAA, that SGI would be working on the MDRO Project with its affiliates, including Lasertel, which had expertise with lasers, and Leonardo which had facilities in Edinburgh and would oversee the work of UoE at ERI. Nomir also knew that UoE would perform the in vitro testing of Nomir laser technology and would conduct the human pilot studies. In addition, Nomir knew that SGI’s parent company would be funding the MDRO Project. Nomir entered into the EAA knowing all of this.
206.
More importantly, Nomir’s contention confuses tests and studies in the early development phase of the MDRO Project with the ultimate goal and end product of the Project. The EAA states that it addressed the collaboration between SGI and Nomir to pursue "business opportunities using the photobiological effects of laser technology for eradication of multi-drug-resistant organisms (‘MDRO’s’) in human nasal passages and potentially in other clinical medical applications for the treatment of MDRO’s."195 The Business Plan states that SGI entered into the EAA with Nomir "for the development and commercialization of a laser system for the treatment of MRSA in affected patients via nasal decolonization."196 The evidence in this case does not show that SGI ever departed from the stated purpose of the EAA and the MDRO Project.197
207.
The Business Plan specifically provided for in vitro testing of the laser by Selex and UoE. The Business Plan also provided for a two-phase pilot study, and the parties agreed on the protocols for both HP1 and HP2. Selex’s work on these studies was not outside the scope of the Business Plan. The purpose of the pilot studies was to provide empirical data which could be used in developing the protocol of the clinical trial and to ensure it was geared properly to maximize the opportunity for success, and to provide the basis for FDA pre-submission review and feedback ahead of the clinical trial.198 There is no reason to believe that the all-important clinical trial, the applications to government authorities for regulatory approval, and the product ultimately brought to commercialization would not be consistent with the purpose and objective of the EAA, the Business Plan, and the MDRO Project.
208.
Most of the evidence that Nomir points to in support of its laser-alone product contention consists of communications among the Parties about HP2 before the Edinburgh meetings. What is important is how the Parties resolved their differences and agreed on a HP2 protocol. Moreover, Nomir knew that Leonardo was considering a laser-alone therapy, and Nomir agreed that it would not try to stop Leonardo from looking into the option.199 Nomir also knew that Dr. Walsh of UoE expressed the opinion that he could see no credible market for a laser device that simply complemented mupirocin.200 That was Dr. Walsh’s view, but it did not cause UoE to discontinue its work on laser plus mupirocin. The important thing is that the differing views about what the HP2 study should be was resolved by the Parties at their Edinburgh meetings in June 2016, and their agreement was incorporated into the HP2 protocol. Consistent with the agreement of the Parties, the HP2 protocol had a laser alone arm201 that would be used on MSSA-positive patients.202
209.
Nomir’s reliance on the Scottish Enterprise Grant Application by Leonardo and evidence of what the Parties discussed concerning what Selex should do are misdirected. What the Parties agreed to do was set forth in the Business Plan, and that must be the focus of an analysis of whether Nomir had the right to terminate the EAA under Section 10(c). Nomir’s argument that laser alone and MSSA are outside the Field of Use under the EAA is not persuasive.203

b. The Non-Utility of HP1

210.
Nomir contends that the HP1 study had "zero utility for the MDRO Project." On the clinical side, Nomir contends the study was a failure because it yielded only five MRSA-positive patients which is a sample of no statistical relevance. On the in vitro side, Nomir argues that it too was a failure because the HP1 protocol required that all MRSA and MSSA isolates be tested for resistance, type of resistance and biofilm formation and these tests were not done. Nomir concludes that conducting HP1 at the ERI had been a waste of time.204
211.
The Business Plan did not prescribe any relative participation rate between MRSA and MSSA patients in HP1 and HP2.205 The Parties, including Nomir, understood that, in general, MSSA colonization is far more common than MRSA colonization, and that only 1-3% of the general population are MRSA-colonized.206 The Parties discussed that they could potentially recruit a sufficient number of MRSA patients to do a MRSA-only study by including patients from all departments of ERI—such as the ICU and renal unit which have higher rates of MRSA colonization than the general population—but they made the decision to limit the studies to relatively healthy elective orthopedic patients in order to avoid co-morbidities and other confounding factors.207 The Parties understood that, as a tradeoff, this meant that the studies would include many more MSSA patients than MRSA patients.208 Dr. Bornstein testified that he clearly understood at the time of the Business Plan that only 12% of the patients in HP1 colonized with staph would be MRSA-colonized.209
212.
The HP1 protocol itself, reviewed and approved by Nomir, reported on MRSA colonization rates of elective surgery orthopedic patients at ERI based on a 200 patient epidemiological study conducted by UoE. Of the 60 positive S. aureus cases 7 (3.5% of total; 12% of all SA cases) were MRSA-positive.210 The number of MRSA-colonized patients recruited for HP1 was consistent with the Parties’ expectations when they made the decision to conduct the pilot studies at ERI’s elective orthopedic surgery unit. In numerous documents shared with Nomir, the UoE set the Parties’ expectations for the humans pilot studies, detailing the absolute number of MRSA cases at ERI, the relative incidences of MRSA and MSSA, and ultimately, in early 2015, the results of the 200-patient epidemiological study of MRSA and MSSA colonization rates at ERI’s elective orthopedic surgery unit. Based on this data, the

Parties knew from the start that there would be relatively few MRSA-colonized patients but many MSSA-colonized patients enrolled in the pilot studies.211

213.
With respect to Nomir's claim that SGI failed to conduct the in vitro work provided for in the HP1 protocol, the UoE did conduct the requisite tests. On March 11, 2017, UoE's Dr. Tsang reported to Selex that UoE had conducted the requisite tests of the frozen swabs, only qualifying his confirmation by adding the genotyping data might take a bit longer because it was held at a lab run by other UoE doctors and not immediately accessible to him.212 On March 13 and 15, 2017, Dr. Tseng sent Selex a summary of the MRSA and mupirocin resistance results.213 Although Nomir complains that the final HP1 report omitted these results, it was never agreed that they would be part of the report. Even had the UoE not conducted the tests, the swabs were frozen and could have been analyzed when the information was deemed necessary. The HP1 protocol did not include a time frame for testing the swabs but stated only that the testing could help inform the design of the clinical trial.214 In any event, Nomir did not list SGI's alleged failure to complete HP1 in vitro testing as a basis for terminating the EAA in its Notice of Default.

c. Failure to Expand HP2

214.
Nomir contends that Selex's work on the HP2 protocol "amounted to nothing for the agreed Project." According to Nomir, based on the recruitment rate seen in HP1, the protocol would recruit at most two MRSA patients and HP2 would be statistically meaningless insofar as MRSA was concerned. In deciding to move forward with HP2 at the ERI, with full knowledge that it would not increase the recruitment rate to enable a successful pilot study and clinical trial, SGI "effectively abandoned" the Project.215
215.
The HP2 protocol was consistent with the Business Plan which designated UoE to conduct the human pilot studies at the elective orthopedic unit of ERI and to include both MSSA and MRSA patients. Although the EAA provides in Section 6(i) that the Business Plan could be amended by the mutual agreement of the Parties, it never was. The HP2 protocol that Selex was following was agreed to by Nomir at the Edinburgh meetings in June 2016. Nomir agreed to the HP2 protocol knowing about the rate of MRSA patients in the ERI elective orthopedic unit generally and about the results of HP1 which confirmed the low rate. Much of Nomir's criticism of the HP2 protocol is directed at UoE's first draft, but that draft was superseded by the agreement reached at the Edinburgh meetings, and the final HP2 protocol was consistent with the Parties' agreement.216
216.
The record supports SGI’s statement that it was open to expanding or supplementing HP2 to obtain more MRSA-positive patients. SGI proposed ways to increase MRSA patients in Edinburgh, but Nomir was (and is) largely dismissive of those proposals.217 Selex was also open to Nomir’s proposal to expand HP2 to New York provided data supported the existence of a viable pool of MRSA patients.218 Nomir undertook the responsibility to explore opportunities in New York and did so with Dr. Krespi at the Cleveland Clinic and with Parexel. Nomir’s discussions with Dr. Krespi appear to have gotten nowhere, and although Nomir received a proposal from Parexel, it was dissatisfied with it due to the high cost and extensive additional time the proposed study would take. For reasons best known to Nomir, it never brought forward a concrete New York proposal for Selex to consider.
217.
Nomir contends that the Business Plan contemplated that the pilot studies would have to be expanded to multiple sites if necessary to reach a sufficient number of MRSA patients. In support of this position, Nomir points to a comment made by Bornstein in the "Formal Clinical Trials" section of the Business Plan that "[e]veryone needs to understand that we may need to go to a second site of potential ‘Higher Mupirocin alone Failure’ to secure adequate numbers to prove our null hypothesis in the pilot and/or pivotal study."219 However, this comment is directed at the mupirocin failure rate, not a shortage of MRSA patients. The logic of Bornstein’s comment is that the parties may need to add a second site to get more S. aureus (MRSA and MSSA) patients for whom the mupirocin-only treatment failed, depending on the results of HP1. Bornstein’s comment did not say that ERI might have too few MRSA patients. Moreover, Nomir’s position today that Nomir never consented to the ERI for HP2 is contradicted by the Business Plan and the HP2 protocol to which it agreed.220

d. UoE’s in vitro Testing

218.
Nomir questions the need for Selex’s in vitro testing of Nomir’s laser and criticizes the quality of UoE’s laboratory work. During the course of the MDRO Project, Kay and Bornstein were persistent and vocal on both accounts. The Business Plan provided there would be such testing. Nomir’s laser technology and claims were new to Selex when the Parties entered into the EAA. It made scientific sense that Selex and UoE would run tests to familiarize themselves with the laser’s operation and capabilities, to confirm the safety and efficacy of Nomir’s technology, and to replicate the results of Bornstein’s earlier tests upon which Nomir’s claims were predicated. It also made business sense given that Selex was investing in Nomir’s technology and would be spending millions of dollars developing it and bringing it to market.
219.
Selex had UoE conduct the in vitro tests on the laser on a track parallel to work on HP1 and HP2 so as not to delay the pilot studies or divert resources from them. What should have been a relatively short exercise became prolonged when UoE scientists did not observe the photobiological effect claimed by Nomir. Based on their tests, it appeared to the UoE scientists that the laser’s killing effect was due to heat rather than a photobiological effect. The implications of these lab results with respect to the viability of Nomir’s claims was unsettling to both Parties. Bornstein’s additional testing at Blue Sky was meant to rectify this. However, the UoE scientists were unable to duplicate Bornstein’s Blue Sky results.
220.
There is no question that UoE’s inability to confirm Nomir’s scientific claims created a substantial amount of friction between the Parties. SGI suggests that the real reason Nomir terminated the EAA was UoE’s test results.221 When Selex reported that the UoE could not replicate Bornstein’s Blue Sky results in mid-June, Nomir began seeking legal advice shortly thereafter and within weeks was drafting a demand letter and statement of claim.222 The Tribunal, however, need not decide whether the UoE test results drove Nomir to terminate the EAA or whether UoE conducted those tests properly. The Tribunal, however, does find that there were valid scientific and business reasons for Selex to have UoE conduct the tests it did and conducting those tests did not constitute cessation of material development by SGI.

6. SGI Did Not Cease Material Development Pursuant to the Business Plan

221.
SGI had achieved the early milestones of the Business Plan’s Major Project Milestones and was actively pursuing Milestone 5 when Nomir terminated the EAA, thus preventing further work on the MDRO Project by SGI.
222.
In the EAA, the Parties allocated responsibilities between themselves in the MDRO Project. Nomir’s role in the in vitro, pilot and clinical trials was a technical consultant.223 SGI’s role was to conduct the in vitro, pilot and clinical trials.224 As technical consultant, Nomir was entitled to express its views. Evidenced by Nomir’s Demand Letter alone, Nomir had strong views about how the in vitro and pilot studies should have been conducted. However, Nomir could not dictate to SGI how to do its job. It was SGI’s role to conduct the in vitro and pilot studies, not Nomir’s. SGI had retained members of the medical faculty of UoE working at ERI, a teaching hospital affiliated with UoE, to conduct the in vitro and pilot studies. ERI had a strong reputation within the UK, and the clinical trials group at ERI had a track record of obtaining regulatory approvals in a timely manner.225
223.
While the Parties considered supplementing or expanding HP2 to include more MRSA patients, and could have amended the Business Plan by mutual agreement to accomplish that, the fact is the Business Plan was never amended. SGI was entitled, indeed required, to adhere to the Business Plan.
224.
The Tribunal concludes that SGI did not cease material development and commercialization of Licensed Products pursuant to the Business Plan.

B. Did Nomir wrongfully terminate theEAA?

1. The EAA's Section 10(c) Termination Provision

225.
EAA Section 10(c) makes clear that Nomir has the right to terminate the EAA only if SGI ceases material development and commercialization of Nomir's Technology pursuant to the Business Plan (and such failure is not cured within 60 days of receipt of written notice).
226.
Nomir terminated the EAA on March 17, 2017.226
227.
The Tribunal has concluded that SGI did not cease material development and commercialization of Nomir's Technology pursuant to the Business Plan. Thus, it follows that Nomir did not have the right to terminate the EAA, and its act terminating the Agreement was a breach of the EAA.227

C. DidSGI Breach Sections 6(a), (b) and (f) of theEAA?

228.
Nomir's second counterclaim alleges that SGI beached Sections 6(a), 6(b) and 6(f) of the EAA.228 Nomir alleges that SGI breached Section 6(a) by failing to use "all reasonable efforts" to maximize Net Sales Revenues from the Nomir Technology; breached Section 6(b) by failing to undertake in vitro work and the trials "as necessary" to achieve the earliest possible commercialization of the Nomir Technology and the greatest feasible amount of Net Sales Revenues; and breached Section 6(f) by failing to use its "best efforts" to achieve the quarterly revenue milestones and pay Nomir the Minimum Quarterly Royalties.229
229.
Nomir and SGI agree that "all reasonable efforts" in Section 6(a) and "best efforts" in Section 6(f) constitute comparable standards that should be interpreted uniformly.230

With respect to Section 6(b), Nomir argues that the "as necessary to achieve" standard is more than an efforts-based standard.231

1. EAA Section 6(b)

230.
Section 6(b) of the EAA provides in relevant part:

"SELEX shall, as necessary to achieve the earliest possible commercialization of the NOMIR Technology and the greatest feasible amount of Net Sales Revenues in the Field of Use and in the Territory, undertake at its own cost: i) hardware and software modifications to the NOMIR Noveon platform, ii) the conduct of in vitro, pilot and clinical trials, iii) regulatory compliance.and iv) product rollout including ongoing revenue generating activities such as sales, marketing, warranty and support."

Nomir contends that Section 6(b) required SGI to do what was "necessary" in respect of the pilot and clinical trials to achieve the "earliest possible commercialization" of the Nomir Technology (i.e. the laser-plus-antibiotic product) and "greatest feasible amount" of revenue. According to Nomir, the relevant inquiry in Section 6(b) is whether SGI has done what was "necessary," not whether SGI has expended some specific level of effort.232

231.
SGI contends that Section 6(b) is not a standard of conduct - that is governed by Section 6(a) - but instead is an allocation of responsibility. Section 6(a) provides in relevant part:

"SELEX shall use all reasonable efforts to maximize Net Sales Revenues in the Territory to be derived during the Term from the NOMIR Technology."

According to SGI, Section 6(a) creates an overall standard of conduct by SGI. The next subsection, Section 6(b), designates SGI as the party obliged to take steps "at its own cost" as necessary to achieve the goals of the Project. This provision is directed to specifying who has to take and pay for these steps.

232.
In this respect, SGI argues, Section 6(b) is similar to Section 5(a) which obligates Nomir to provide technical consulting assistance to SGI "at no charge" concerning the same steps. Section 5(a) provides in relevant part:

"NOMIR shall provide to SELEX at no charge reasonable amounts of technical consulting assistance for hardware and software modifications to the NOMIR Noveon platform, the conduct of in vitro, pilot, clinical trials and regulatory compliance...NOMIR shall also provide to SELEX at no charge reasonable amounts of technical and business support and advice for public relations, marketing and business development planning and training as required in the biological effects of the technology."

Reading Sections 5(a) and 6(b) together, as required by New York law, SGI argues that for the steps necessary to achieve the Project's goals, SGI was the party responsible for undertaking and paying for them, while Nomir was responsible for providing advice to SGI at no charge.233

233.
It is the view of the Tribunal that SGI's interpretation of Section 6(b) is more reasonable and more logical. Nomir's interpretation would impose a higher standard upon SGI to achieve revenues than Section 6(a), which requires SGI to use all reasonable efforts to maximize revenues, and Section 6(f), which requires SGI to use best efforts to achieve revenue milestones, thus effectively rendering Sections 6(a) and 6(b) surplusage. Nomir's interpretation would also create conflicting standards of conduct in achieving the same goal: generating revenue. SGI's interpretation avoids these problems and harmonizes Sections 5(a) and 6(b).
234.
Nomir's interpretation of Section 6(b) is also inconsistent with the Parties' shared understanding at the time the EAA was signed. At the time, Kay assured Creamer that the EAA would not require SGI to achieve any minimum revenues on any particular schedule, "just that you try your best."234
235.
For the reasons indicated above, the Tribunal concludes that Section 6(b) of the EAA does not impose on SGI a standard of conduct different from Sections 6(a) and 6(f).

2. EAA Sections 6(a) and 6(f)

236.
While Nomir and SGI agree that the standard of conduct in EAA Sections 6(a) and 6(f) are comparable, their views diverge on what the standard means.
237.
According to SGI, New York law interprets a "best efforts" clause to "impose[] an obligation to act with good faith in light of one's own capabilities."235 New York courts have found "good faith in light of one's own capabilities" to be the equivalent of good faith business judgment, and where a party acts in good faith and chooses between reasonable business alternatives, taking into account the party's own capabilities and expertise, New York courts will not second guess that decision or substitute their own judgement of what should have been done.236 SGI argues that following an agreed course of action cannot constitute a failure to use best efforts.237
238.
According to Nomir, a "best efforts" clause requires more than showing good faith. Nomir argues that under New York law courts have found that best efforts requires a party to "pursue all reasonable methods for obtaining [the contractual goal]."238 Best efforts, according to Nomir, require a party to pursue such efforts as are reasonable in light of, inter alia, the means at its disposal and of the other party’s justification expectations.239
239.
The Parties’ positions on the meaning of "best efforts," while different, are very similar. However, given the Tribunal’s finding below, it does not matter which is applied.
240.
The facts marshalled by Nomir in support of its claim that SGI breached Sections 6(a) and 6(f) are the same for both, and they are essentially the same used to support Nomir’s first counterclaim for "cessation of material development." These are the allegations of acts and omission by SGI in carrying out the HP1 and HP2 studies. The Tribunal has already concluded that SGI carried out its work on HP1 and HP2 pursuant to the agreed Business Plan and the agreed protocols for HP1 and HP2. In the view of the Tribunal, in the circumstances of this case, SGI’s following an agreed course of action does not constitute a failure to use best efforts or all reasonable efforts.240

3. Additional Reason Why Nomir’s Breach of EAA Section 6 Claims Fail

241.
Under New York law, an essential element of a claim for breach of contract is the existence of damages resulting from the breach.241 For Nomir to establish its counterclaim for breach of EAA Section 6, Nomir must establish the fact (existence) of damages, which in the case of lost profits must be "reasonably certain."242 Because the Tribunal concludes that Nomir has failed to establish the fact of damages resulting from the alleged breaches to the reasonably certain standard (see Section XIII.D below), Nomir’s claim of breach of EAA Section 6 must fail.243

D. Nomir's Claim for Damages for Lost or Delayed Royalties

242.
Because the Tribunal finds against Nomir on the merits of its counterclaims, there is no need to address Nomir’s claims of damages resulting from the alleged breaches of the EAA. However, because the Tribunal bases an alternative ground for its finding of no breach of Section 6 the EAA on Nomir’s failure to prove damages, we address Nomir’s damages claim, but only briefly.
243.
Nomir’s claim for damages is for lost or delayed receipt of royalties under the EAA. Nomir seeks damages in the amount of $219,078,177 (inclusive of pre-award interest) for the delay caused by SGI’s cessation of material development and commercialization of Licensed Products pursuant to the Business Plan. Alternatively, Nomir seeks damages of $88,477,795 (inclusive of pre-award interest) for the delay caused by SGI’s breaches of Sections 5(b), 6(a) 6(b) and 6(f) of the EAA244.

1. Section 9 of the EAA

244.
SGI contends that Nomir’s claim for lost or delayed royalties is barred by Section 9 of the EAA which precludes recovery of "loss of revenue."245 SGI also contends that Nomir’s claim for royalties is a claim for consequential damages, which is also barred by Section 9, which precludes recovery of "consequential loss or damages."246 According to SGI, the meaning of Section 9 is clear, but if the meaning of that section is in any way ambiguous, the parol evidence of the negotiating history of the EAA confirms that the Parties intended that neither Party would be liable for lost profits in the event of breach by the other.247 SGI also argues that precluding lost profits made business sense given that the EAA was an early-stage development agreement with uncertain outcomes and SGI’s due diligence on the efficacy and safety of Nomir’s technology had only just begun at the time the EAA was signed. Precluding lost profits was also consistent with other provisions of the EAA which provided that the Project Milestones and the Exhibit B forecasts were not binding.248
245.
Nomir contends that Section 9 of the EAA addresses indemnification of third-party claims, not liability between the Parties. The paragraph precluding recovery of loss of revenue and consequential loss or damages is in a section of the EAA with the heading "Indemnification."249 With respect to the text of Section 9, Nomir contends that the plain meaning is that it precludes loss of revenues that are consequential damages, not loss of revenues that are general damages.250 According to Nomir, its claim for royalties is a claim for general damages, not consequential damages. Nomir submits that Section 9 is clear and unambiguous, and, therefore, it would be inappropriate to consider parol evidence.251 Finally, Nomir argues that interpreting Section 9 to preclude recovery of lost royalties makes no commercial sense because SGI would be free to breach the agreement with impunity because Nomir would be limited to recovering its out-of-pocket expenses.252
246.
Addressing first Nomir’s contention that Section 9 concerns only indemnification of third-party claims, not liability between the Parties, Section 11.12 of the EAA provides that "[s]ection and paragraph headings in this Agreement are provided for convenience of reference only and shall not be deemed to constitute a part hereof." Thus, no conclusion can be drawn from the fact that the heading of Section 9 is "Indemnification." The first paragraph of Section 9 does address indemnification and does so in specific terms, providing a duty of each Party to "defend, indemnify and hold the other Party harmless from and against any and all claims." By contrast, the second paragraph of Section 9 precluding recovery of loss of revenue contains no reference to indemnity, indemnification or third-party claims. Moreover, the second paragraph begins "[n]otwithstanding any other provisions and clauses in this Agreement..." indicating that it stands apart from other provisions in the EAA, including the preceding paragraph on indemnification. In the view of the Tribunal, the second paragraph of Section 9 applies broadly by its terms and is not limited to indemnification of third-party claims.
247.
While both Parties contend that the meaning of Section 9 is plain and unambiguous, each offers an interpretation that is substantially different from the other’s. SGI’s interpretation is that Section 9 by its explicit terms bars Nomir from recovering "loss of revenue" or "consequential loss or damages" from SGI "howsoever caused." Royalties, SGI submits, are included within "revenue." Nomir’s interpretation is that Section 9 applies only to loss of revenues that are consequential because the words "any other" show that the "loss of use, loss of business, loss of revenue" comprise part of the category of excluded "incidental, special, indirect, consequential loss or damages."253 Moreover, Nomir contends, Section 9's specific reference to "revenue" - not "royalty" - makes clear that the provision was not intended to apply to Nomir's royalties under the EAA.254 One aspect of the Parties' disagreement over the proper interpretation of Section 9 can be disposed of quickly. In the view of the Tribunal, the word "revenue" is broad enough to include "royalties" and there is no reason to exclude royalties from the provision. The broader and more fundamental disagreement in the Parties' interpretation of Section 9 is not so easily resolved. Nomir's argument is essentially a reverse ejusdem generis argument: rather than general words that follow specific words in a list being construed as referring only to the types of things identified by the specific words, Nomir would have general words preceding specific words in a list construed as referring only to the types of things identified in the specific words that follow.255 While a somewhat unusual approach, it is a plausible interpretation. Presented with two conflicting interpretations of Section 9, the Tribunal finds it instructive to look at the parol evidence of the negotiating history of this section of the EAA.
248.
Creamer testified that this provision was not in the early drafts of the EAA, but he included it as an addition in one of his markups.256 According to Creamer, for the same reason SGI believed it was premature to commit to the Project achieving any level of revenue (given the uncertainties about whether the science worked, whether regulatory approval would be obtained, and whether the product would succeed in the market), SGI wanted to exclude lost profits of any kind and avoid any dispute over speculative forecasts.257 Creamer discussed this provision with Kay in a teleconference leading up to the signing of the EAA, and according to Creamer, Kay agreed it was their understanding that neither Party would be liable for lost profits in the event of a breach by the other. According to Creamer, Kay said he accepted the rationale that the EAA was a development contract and there was always the possibility something could go wrong, and thus he supported inclusion of the provision.258
249.
Kay did not remember this conversation. He testified that he doubted the conversation took place, but did not deny that it did. He confirmed that the provision was added by Creamer.259 Kay testified that as CEO he focuses on business aspects of contracts and leaves the legal aspects to others more appropriate to handle them, but he did not say that he referred this issue to Nomir's General Counsel Richard Goodkin (or any other lawyer). Kay added that he "never would have agreed that Nomir was not entitled to recover its lost royalties if SGI breached the EAA."260 In response, Creamer testified that Kay never said that to him at the time, and that he did not discuss the provision with anyone else at Nomir other than Kay. Specifically, Creamer testified that he did not discuss the provision with Richard Goodkin.261
250.
Having considered the text of Section 9 in light of the different interpretations proffered by the Parties, and having reviewed the parol evidence concerning the drafting of this section of the EAA, the Tribunal concludes that Section 9, properly interpreted, precludes Nomir's claim for lost or delayed royalties.

2. Nomir's Damages

251.
The Tribunal has thoroughly reviewed the extensive submissions of the Parties on Nomir's damages claims. Those submissions include almost 230 pages of memorials and expert reports of Garrett W. Rush, Laura B. Stamm and James E. Malackowski on the quantum of damages, as well as other expert reports on elements of Nomir's damages case.
252.
Nomir recognizes the burden it has to prove damages. "The fact of damages must be ‘reasonably certain,' not ‘speculative, possible, and imaginary.' The non-breaching party has the burden of proving the ‘fact of damages by a preponderance of the evidence.'"262 Nomir also recognizes what it must show to satisfy its burden of proof:

"The necessary inquiry with respect to reasonable certainty is whether Nomir has proven, by a preponderance of the evidence (‘more likely than not'), that it has suffered damages as a result of SGI's breach. Nomir has satisfied this standard because it is reasonably certain that Nomir's technology is safe and effective, that it will obtain regulatory approval, and that it is commercially viable."263

253.
Having considered all of the written submissions, testimony at the hearing and arguments of counsel on Nomir's damages, it is the view of the Tribunal that Nomir has failed to prove to the applicable standard that it has suffered damages as a result of SGI's alleged breaches of the EAA. The Nomir Technology that was the subject of the MDRO Project has never been tested on humans. The HP2 study would have been the first time it was used on humans, but that study was halted before it started because Nomir terminated the EAA. The UoE in vitro experiments cast doubt on both the safety and effectiveness of Nomir's Technology. The HP2 study and the clinical trial may have resolved those doubts if they had gone forward as planned by the Parties in the Business Plan, but they did not go forward. The Tribunal finds that Nomir failed to prove that its technology is safe and effective by a preponderance of the evidence. This failure of proof on this critical threshold issue is fatal to Nomir's damages claim.
254.
Even more speculative is whether Nomir's technology would have received regulatory approval. It is well known that only a small percentage of drugs and medical products make it through the gauntlet of pilot studies and clinical trials to receive regulatory approval. While the regulatory pathway for FDA review of a Class II product like the MDRO laser may increase the odds of approval, given the evidence of the effectiveness of the laser in the record, it is not possible to quantify the chances of regulatory success with any degree of certainty.264
255.
Showing the commercial viability of Nomir's technology is the third element of Nomir's damages claim. It assumes that the HP2 study and the clinical trial would successfully establish the safety and efficacy of Nomir's technology and that it would receive regulatory approval. The results of HP1 cast doubt on the need for Nomir's laser-plus-mupirocin technology when it showed that the standard therapy for treating S. aureus, mupirocin alone, was more successful than expected. Moreover, the independent laboratory tests of Nomir's technology by UoE scientists did not confirm Bornstein's laboratory tests or Nomir's claims that its technology was safe and effective in treating S. aureus colonization in the human nose. In the view of the Tribunal, Nomir's prediction of commercial success for its technology is highly speculative. The Tribunal finds that Nomir failed to prove that its technology is commercially viable by a preponderance of the evidence.
256.
In conclusion, the Tribunal finds that Nomir's damages claims are too speculative, and that Nomir failed to prove that it suffered damages as a result of SGI's alleged breaches of the EAA by a preponderance of the evidence.

E. SGI’s Claim for Reliance Damages

1. SGI’s Claim for Damages

257.
SGI seeks to recover its out-of-pocket costs in performing the EAA as damages for Nomir's wrongful termination of the EAA. SGI seeks $3,105,861 (plus interest).265
258.
SGI recognizes that under New York law the default rule for material breach of contract is that the non-breaching party is entitled to damages placing it in the same economic position it would have been in if the breaching party had fully performed. However, such "expectation" damages may not be merely speculative. In SGI's view, any measure of expectation damages in this case would require a prediction of the Parties' future profits from commercialization of the MDRO Project, which are only speculative. Because the standard measure of expectation damages is unduly speculative in this case, SGI seeks in the alternative its "reliance" damages. This is also consistent with SGI's position that Section 9 of the EAA bars recovery of lost profits or revenues.266
259.
SGI’s reliance damages are comprised of the following categories:

(a) $1,576,524 in costs incurred developing and manufacturing the MDRO laser hardware267

(b) $1,060,764 paid to UoE for its work on the MDRO Project268

(c) $538,032 in direct labor costs incurred by Leonardo on the MDRO Project269

(d) $460,061 in other expenditures on the Project, including the costs to set up the Selex Medical lab at BioQuarter near ERI ($119,051), payment to a research follow ($312,778), payment to Nomir for work securing intellectual property rights in connection with the Project ($19,448.64), and payment to Emergo for its consulting work on the MDRO Project ($8,783.46).270

The Total is $3,635,381. Of these costs, the Scottish Enterprise Grant reimbursed SGI $529,520. Thus, SGI’s out-of-pocket loss on the Project is $3,105,861.271

2. The Tribunal’s Decision

260.
New York has adopted the rule, stated in the Restatement (Second) of Contracts §349, that where expectation damages are uncertain, a plaintiff may recover "damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed."272 Such out-of-pocket damages allow the non-breaching party "to recover identifiable costs incurred in reliance on the breaching party’s promise, where the breaching party could reasonably foresee that they would be incurred."273
261.
SGI’s out-of-pocket costs were identifiable and reasonably foreseeable. These costs were incurred on modifications to the MDRO laser, seeking and securing regulatory approvals for the laser and the human pilot studies, and preparing for and carrying out human pilot studies, all within the scope of work on the MDRO Project assigned to SGI in Section 6(b) of the EAA. The costs are documented and appear reasonable. Nomir has not contested them.
262.
The Tribunal finds that SGI's out-of-pocket reliance damages are not barred by Section 9 of the EAA (and Nomir does not contend that they do).
263.
The Tribunal concludes that SGI is entitled to recover its reliance damages of $3,105,861 for Nomir's wrongful termination of the EAA.

XIV. COSTS

264.
Both parties in this arbitration claim entitlement to the costs of the arbitration and, to different extents, their legal and other costs.

A. Claimant's Costs

265.
Claimant seeks to recover costs as a sanction for Nomir's misconduct in the arbitration. Specifically, SGI seeks compensation for its increased costs incurred as a result of Nomir's alleged misconduct during the disclosure phase in this arbitration, relying on Articles 20(7) and 31(5) of the ICDR Arbitration Rules, Rule 58 of the American Arbitration Association Commercial Arbitration Rules ("AAA Arbitration Rules") and Article 9.7 of the IBA Rules.274 SGI seeks $836,100 for these costs.
266.
Claimant contends that the Tribunal lacks jurisdiction to award legal fees to the prevailing party because the EAA has no fee-shifting provision in its agreement to arbitrate, and neither the AAA Arbitration Rules, which the parties adopted in §11.3(a) of the EAA, nor New York law, which governs the EAA, empower the Tribunal to award attorneys' fees to the prevailing party in the absence of an agreement. However, SGI would consent to the jurisdiction of the Tribunal to award legal fees to the prevailing party if Nomir posts security for the full amount of SGI's legal fees in advance of an award.275
267.
If the Tribunal concludes that it has the authority to shift fees, SGI's position is: (a) if Nomir prevails, the Tribunal should refuse to award Nomir fees based on its conduct in this arbitration, and (b) if SGI prevails, the Tribunal should award SGI its legal fees and expenses.276
268.
With respect to the costs of the arbitration, the ICDR administration fees and the fees and expenses of the arbitrators, it appears that SGI seeks to recover such costs, whether or not the Tribunal concludes that it has the authority to shift legal fees and expenses.277
269.
Claimant’s requested costs are as follows:278
The Arbitration Proceedings: Legal Counsel Fees Costs and Expenses AAA/ICDR/NYIAC Fees (Total) $9,037,426.65 2,855,015.30 389,100.00 $12,281,541.95
Costs as Sanctions Claim: Legal Fees (uncover withheld documents and obtain relief) $208,500
Legal and Expert Fees (revise Rejoinder submissions) 524,425
Legal and Expert Fees (re-review materials)103,175
(Total) $836,100

B. Respondent’s Costs

270.
Respondent seeks to recover from SGI all the costs Nomir incurred in connection with this arbitration during the period July 6, 2017 (when Nomir secured funding to pursue its claim) through the Final Arguments, relying on Article 34 of the ICDR Arbitration Rules. Specifically, Nomir seeks to recover the ICDR fees and Tribunal expenses, its legal fees and expenses, its expert fees and expenses, and the cost of its third-party funding premium.279
271.
Respondent seeks recovery of the following costs:280
The Arbitration Proceedings: Attorney’s Fees/Expenses Expert Fees/Expenses ICDR and Tribunal Fees (Total) $8,116,094.70 724,162.33 438,861.73 $9,279,118.76
Third-Party Funding Premium: $33,400,000 or 30% of Award on damages and costs, whichever is greater

C. The Tribunal’s Determination on Costs

272.
Article 34 of the ICDR Arbitration Rules provides:

"The arbitral tribunal shall fix the costs of arbitration in its award(s). The tribunal may allocate such costs among the parties if it determines that allocation is reasonable, taking into account the circumstances of the case.

Such costs may include:

a. the fees and expenses of the arbitrators;

b. the costs of assistance required by the tribunal, including its experts;

c. the fees and expenses of the Administrator;

d. the reasonable legal and other costs incurred by the parties;

e. any costs incurred in connection with a notice for interim or emergency relief pursuant to Articles 6 or 24;

f. any costs incurred in connection with a request for consolidation pursuant to Article 8; and

g. any costs associated with information exchange pursuant to Article 21."

1. Claimant’s Request for Costs as a Sanction

273.
SGI seeks to recover as a sanction its increased costs incurred as a result of Nomir's alleged misconduct during the document disclosure phase of this arbitration.281 Specifically, SGI seeks to recover the following costs:

(a) $208,500 in legal fees to uncover previously withhold documents and obtain related relief from the Tribunal

(b) $441,563 in legal fees and $82,862 in expert fees to revise SGI's Rejoinder to Counterclaim memorial and expert reports in light of the late-produced documents

(c) $96,050 in additional legal fees and $7,125 in incremental expert fees to re-review materials following the months-long delay of the Hearing caused by Nomir

(d) An unquantified amount associated with reviewing the late-produced documents (the amount left to the discretion of the Tribunal).

SGI seeks a total of not less than $836,100.282

274.
The ICDR Arbitration Rules give the Tribunal the authority to award as costs the expenses of a party arising from the production of documents, and the Tribunal may allocate such costs if it determines that allocation is reasonable.283 The ICDR Arbitration Rules also grant the Tribunal the authority to allocate costs to protect the efficiency and integrity of the arbitration and to award costs to a party to compensate for misconduct in the arbitration.284 In addition, the IBA Rules, which apply as guidelines in this arbitration,285 provide that the Tribunal, if it determines that a party has failed to conduct itself in good faith in the taking of evidence, may take such failure into account in assigning the costs of the arbitration, including costs arising out of the taking of evidence.286
275.
SGI does not seek to recover its increased costs caused by Nomir's conduct in document disclosure under the Tribunal's general authority to allocate costs in an arbitration, including costs associated with document production.287 Rather, SGI seeks to recover its costs under the Tribunal's authority to sanction a party for misconduct.288 To warrant the imposition of sanctions, the Tribunal must find misconduct by a party or a failure to act in good faith in the taking of evidence.289
276.
Nomir's failings in the document disclosure phase of the case have been well documented.290 The document production phase of the case commenced on March 30, 2018, with the Parties' exchange of requests for the production of documents. Documents not subject to an objection were required to be produced by May 11, 2018. Document requests subject to an objection were submitted to the Tribunal on April 27, 2018, and the Tribunal issued its rulings on objections on May 13, 2018. The Parties were required to produce documents ordered by the Tribunal in its rulings by June 15, 2018.291 In January 2019, SGI requested the Tribunal to intervene in a dispute that had arisen between the Parties arising from Nomir’s document production. After receiving written submissions from the Parties on the issues, the Tribunal issued Procedural Order No. 4, dated February 9, 2019, finding that the documents in question were responsive to SGI’s previously-sustained Document Request No. 3 and should have been produced during the document production phase of the case. The Tribunal directed Nomir to confirm that it had produced all documents responsive to Request No. 3, and in light of new information the Tribunal found that documents relating to a "bridge loan" (covered by SGI Request No. 2, which previously had been overruled) were relevant and ordered Nomir to produce those documents.292 Following the issuance of Procedural Order No. 4, Nomir produced 3,909 additional documents in eleven separate productions between February 15 and April 30, 2019. Printed out, they filled more than twelve bankers boxes, and they more than tripled the number of documents that Nomir produced in this arbitration.293 While many of these documents were produced in response to the Tribunal’s revised ruling on SGI’s Document Request No. 2, many others were responsive to SGI’s Document Request No. 3 (and perhaps others) and should have been produced in the document disclosure phase of this arbitration. Nomir’s late production of documents disrupted SGI’s written submission in this proceeding: SGI did not have these documents when it filed its Reply Memorial submissions on September 9, 2018, and SGI’s Rejoinder to Counterclaims submissions, originally due on February 22, 2019, were delayed until May 31, 2019. In the process, SGI incurred significant additional expenses. In addition, the Hearing was delayed nine months, from April 2019 to January 2020.
277.
The Tribunal indicated in Procedural Order No. 7 that in deciding whether sanctions are warranted for Nomir’s document production failings, the Tribunal would determine the relative importance of the late-produced documents (were they important and necessary for the determination of the issues as SGI contends, or whether they were largely duplicative and added little to what Nomir had already produced previously as Nomir contends), whether any documents were intentionally withheld, and whether any documents were destroyed.294
278.
Of the late-produced documents, 162 were made exhibits and submitted to the Tribunal (Exs. C-392 to C-553). Many were material and shed light on issues in dispute.295 However, the Tribunal did not find any of them to be determinative of any issue, and the Tribunal relied on few of them in writing this Final Award.
279.
Although SGI maintains that Nomir destroyed (or continues to conceal) relevant documents,296 the Tribunal has seen no evidence of document destruction or concealment.297
280.
While Nomir's failure to produce documents timely is obvious, and there is no question that the procedures originally employed by Nomir and its counsel to review, select and produce documents was deficient, the Tribunal has not seen evidence of the willful withholding of documents required to be produced. Mistakes were made, but the conduct that led to the late production of documents was at most negligent, not intentional.
281.
For the reasons stated above, the Tribunal does not find misconduct or bad faith by Nomir in the document disclosure phase of this arbitration. Accordingly, the Tribunal declines SGI's requests for an award of costs as a sanction for misconduct.

2. Costs of the Arbitration

282.
The ICDR has fixed the costs of the arbitration at $950,223.90. This amount covered the fees and expenses of the Administrator totaling $79,086.73, and the fees and expenses of the arbitrators totaling $871,137.17. SGI has incurred $454,543.59, and Nomir has incurred $495,680.31, in deposits as advances on the costs.
283.
Both Parties agree that the Tribunal has the authority to allocate the costs of the arbitration.298 The Tribunal has determined that SGI is the prevailing Party in this arbitration, having succeeded on its claim against Nomir. Nomir has not succeeded on its counterclaims against SGI. The Tribunal, exercising its discretion to allocate the costs of the arbitration under Article 34(a) and (c) of the ICDR Rules, directs that Nomir reimburse SGI for the arbitration costs it has incurred, namely $454,543.59.

3. The Parties' Legal Costs and Expenses

284.
SGI submits that pursuant to the EAA, New York law and the AAA Rules (incorporated by the EAA), the Tribunal lacks jurisdiction and authority to award legal fees to the prevailing party.299
285.
The EAA provides in Section 11.7 that the Agreement is to be governed by New York law. New York follows the prevailing "American Rule" on fee-shifting, allowing an award of attorneys' fees only if they are explicitly provided for in a statute or contract.300 The EAA has no fee-shifting provision.
286.
The EAA provides in Section 11.3(a) that all disputes shall be settled by arbitration, and that "such arbitration proceedings shall be adopted in accordance with generally accepted American Arbitration Association arbitration rules." This proceeding was commenced with the filing of a Demand for Arbitration with the AAA. Rule 47(d)(ii) of the AAA Arbitration Rules provides that attorneys' fees may be awarded only "if all parties have requested such an award or it is authorized by law or their arbitration agreement." New York courts have disallowed awards of attorneys' fees in arbitration absent explicit party agreement otherwise.301
287.
In this proceeding, SGI offered to provide the necessary agreement to allow fee shifting if Nomir and its third-party funder provided security in escrow to guarantee payment of the full amount of SGI's legal fees incurred in this arbitration if SGI prevails on the merits.302 Nomir did not accept this offer.
288.
SGI accepts that the ICDR Arbitration Rules give the Tribunal authority to allocate attorneys' fees to the prevailing party. However, SGI contends that agreeing to allow this arbitration to be administered under the ICDR Arbitration Rules did not alter the fact that the Parties agreed that arbitration of a dispute under the EAA is to be governed by the AAA Arbitration Rules.303
289.
Nomir's position is that selection of the ICDR Arbitration Rules provides an independent basis for a tribunal to award attorneys' fees to the successful party, even absent a cost-shifting provision in the contract or authorization under the substantive law that governs the dispute.304 Nomir noted that SGI, in its application for security for costs, argued for the first time that the Tribunal lacks authority to allocate legal fees between the Parties. However, Nomir has not specifically addressed SGI's argument about the applicability of the AAA Arbitration Rules.305 Nomir requests that the Tribunal order SGI to bear all of the costs incurred by Nomir in connection with this arbitration.306
290.
The EAA clearly provides that arbitration of disputes under the Agreement is governed by the AAA Arbitration Rules, and those Rules permit the shifting of attorneys' fees only if the parties agree. Although this case was subsequently administered under the ICDR Arbitration Rules, the Tribunal accepts SGI's position that this administrative choice did not abrogate the Parties' contractual choice of having the AAA Arbitration Rules govern the arbitration.
291.
Therefore, the Tribunal concludes that it does not have the authority to award attorneys' fees in this case because the EAA does not have the requisite agreement to shift attorneys' fees, the Parties did not otherwise agree to shift attorneys' fees, and New York law does not allow the shifting of attorneys' fees absent an agreement or applicable statue. Accordingly, the Tribunal does not award attorneys' fees to SGI or Nomir.
292.
SGI incurred other costs and expenses in this arbitration that are not attorneys' fees. Those costs and expenses amount to $2,855,015.30. Nomir has not challenged the basis for these costs or their reasonableness. The Tribunal notes that Nomir incurred $986,706.03 in non-attorneys' fees costs. Having concluded that SGI is the prevailing Party in this arbitration, the Tribunal, exercising its discretion to allocate costs under Article 34 of the ICDR Arbitration Rules, awards SGI its non-attorneys' fees costs of $2,855,015.30 and directs Nomir to pay this sum to SGI.

4. Respondent’s Third-Party Funding Premium

293.
Nomir seeks to recover its costs of third-party funding in this arbitration, which it contends form part of the "reasonable legal and other costs incurred" in this case.307 Specifically, Nomir seeks to recover:

(a) the amount extended by its third-party funder to cover Nomir's legal and other costs of the arbitration, $8,350,000

(b) 400% of the sum advanced by the third-party funder (i.e. 400% of $8,350,000 for a total of $33,400,000), or 30% of the amount of damages (including interest) and costs awarded to Nomir, whichever is higher

(c) interest at the higher of the award rate or 8% above the Bank of England base rate.308

294.
Because the Tribunal has determined that Nomir failed on its counterclaims in this arbitration, and because the Tribunal declines to award Nomir its costs, there is no need for the Tribunal to determine whether third-party funding costs, including a funding premium, are recoverable as costs under the ICDR Arbitration Rules or the AAA Arbitration Rules.

XV. AWARD

For the reasons stated, the unanimous award of the Tribunal is as follows:

1. Claimant’s claim is granted. Respondent shall pay Claimant $3,105,861 plus interest at the New York statutory rate of 9% from the date of Respondent’s termination of the EAA (March 17, 2017) until the date the sum is paid.

2. Respondent’s counterclaims are denied.

3. The administrative fees and expenses of the International Centre for Dispute Resolution ("ICDR") totaling $79,086.73 and the compensation and expenses of the arbitrators totaling $871,137.17 shall be borne by Respondent. Therefore, Respondent shall reimburse Claimant the sum of $454,543.59 representing that portion of said fees and expenses incurred by Claimant, upon confirmation by the ICDR that Claimant has paid the final deposit request.

4. Respondent shall pay Claimant $2,855,015.30 for its non-attorneys’ fees expenses.

5. The Respondent shall pay interest at the New York statutory rate of 9% on items (3) and (4) above from the date of this Final Award until the date the sums are paid.

6. All amounts mentioned in this section of the Final Award are to be paid within 30 days of transmittal of this Final Award to the Parties.

7. All other claims of the Parties, including claims for costs, are denied.

We hereby certify that, for the purposes of Article I of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, this Final Award was made in New’ York, NY, United States of America.

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