Joint Patent Owners May Contractually Modify Their Statutory Rights
WISCONSIN ALUMNI RESEARCH FOUNDATION v. XENON PHARMACEUTICALS, INC. (January 5, 2010)
Scientists at the University of Wisconsin discovered that suppressing a certain enzyme in the body reduced cholesterol levels. They disclosed their discovery to the Wisconsin Alumni Research Foundation, which manages patents for the University. They assigned all their rights to the Foundation. Xenon Pharmaceuticals was very interested in the same effort. Xenon and the University entered into a series of agreements under which Xenon sponsored various research projects; Xenon and the Foundation entered into an agreement giving Xenon exclusive licensing rights in return for a percentage of fees received; and Xenon entered into a series of agreements directly with the individual researchers to undertake various projects. Xenon and the Foundation filed for and received a joint patent. The relationship soured. Xenon did some related work with a third party and with an individual University scientist with whom it had a consulting agreement. When it filed a patent application covering the results of that work, the Foundation objected. It also licensed the technology covered by both the joint patent and the related patent to Novartis. The Foundation demanded its contractual percentage -- Xenon refused. The Foundation brought suit, claiming that both the Novartis license and the related patent violated the party's agreement. Xenon counterclaimed. In a series of rulings, the court held that Xenon breached the agreement by granting the sublicense to Novartis and that Xenon owed licensing fees to the Foundation. The court refused the Foundation's request for a declaration that the work on the related patent belonged to it and concluded that the Foundation's argument that it had a right to terminate the contract was not developed sufficiently in its briefs. At trial on damages, the jury awarded $1 million, which was reduced on remittitur to $300,000. The parties cross-appealed.
In their opinion, Chief Judge Easterbrook and Judges Bauer and Sykes affirmed in part, reversed in part and remanded. The Court first addressed Xenon's transfer to Novartis. The Court agreed with Xenon that each joint patent holder, under federal law, is allowed to use the patented technology without regard to the rights of the other. However, that right is subject to modification by agreement of the parties. Here, the Foundation conditioned Xenon's right to license the technology on its payment of a fee. Interpreting the terms of their agreement, the Court concluded that Xenon owed the contractual fee upon its receipt of its fee and its failure to remit it was a breach of the agreement. The Court then rejected Xenon's argument that the Foundation presented insufficient evidence to support its damages claim. With respect to the Foundation's right to terminate the agreement, the Court concluded that the lower court was in error when it held that the right to terminate was contingent upon a judicial finding of a breach. The agreement specifically gives the Foundation the right to terminate the agreement upon a breach by Xenon and a failure to remedy the breach within 90 days after written notice. The Foundation considered Xenon's conduct a breach and gave appropriate notice. Even though it filed suit prior to the expiration of the 90 days, it's right to terminate after a failure to cure remains. It need not await a judicial determination. The Court concluded that the Foundation properly terminated the agreement. Finally, the Court addressed the Foundation's claim for a declaration of its ownership of the related technology. The Court concluded that the contractual terms were clear and that the scientist's work, although partially sponsored by Xenon, was owned by the Foundation.
Salik Rao operated as a BP gasoline service station dealer in the Chicago area. For 10 years beginning in the early 1990s, Rao gave over $100,000 worth of cash and gifts to a BP sales manager. In return, the sales manager performed many favors for Rao, to his great benefit. In 2003, Rao reported this improper activity to BP. However, he characterized it as extortion on the part of the sales manager. BP begin an investigation which ultimately led to the termination of the sales manager in November of 2003. BP continued its investigation, seeking to confirm the extortion. Although Rao promised to cooperate, he never met with BP after November of 2003 and affirmatively withdrew his pledge of cooperation in June of 2004. BP notified Rao in October 2004 that it was terminating its franchise relationship with him because of his improper activity. Rao brought suit under the Petroleum Marketing Practices Act ("PMPA"), as well as RICO, fraud, breach of contract and extortion. The court dismissed the counts based on RICO, fraud and breach of contract and granted summary judgment on the PMPA claim. Rao appeals.
When Dr. Bruce Smith filed a bankruptcy petition in 2004, plaintiffs had separate lawsuits pending against him in state court. Smith listed neither of them on his creditors schedule, although he did list their attorney. That petition was dismissed, however, and a second petition filed a year later listed neither the plaintiffs nor their attorney. Plaintiffs' claims were potentially non-dischargeable because they were based on an alleged sexual assault. Plaintiffs never received notice of the petition. However, in late December, just a few weeks before the deadline for objecting to the discharge, Smith's lawyers in the state court cases filed motions asking for transfers to the bankruptcy calendar. The motions were received in plaintiffs' lawyer's office on December 23. He was out of town and did not actually see them until January 4 of the next year, five days before the deadline. The motions provided very little information about the bankruptcy, other than its filing. The deadline came and went. The bankruptcy court entered an order of discharge. Almost a year later, plaintiffs sought relief from the bankruptcy court. After taking testimony, the court concluded that plaintiffs could proceed against Smith in state court. In doing so, the court specifically found that the omission of plaintiffs from the schedule was deliberate and that the notice, albeit received before the final discharge, was too late. The district court affirmed the decision of the bankruptcy court. Smith appeals.
A lawsuit was filed in 1984 challenging an Illinois statute requiring parental notice of an abortion of a minor. The Court affirmed a district court order that held the act unconstitutional because it failed to provide for anonymity and an expedited appeal. The district court later concluded that an Illinois Supreme Court Rule did not cure the defect and continued an injunction in force. In 1995, the Illinois General Assembly repealed the act and replaced it with the Illinois Parental Notice of Abortion Act of 1995 (the "Act"). The Act requires a doctor to provide 48 hours notice to an adult family member of his or her intention to perform an abortion on a minor or incompetent person. In a judicial bypass procedure, a court can order notice waived if it determines by a preponderance of the evidence that a) the petitioner is sufficiently mature to intelligently decide whether to have an abortion, or b) that notification would not be in the best interest of the petitioner. The parties agreed to continue the injunction until the Supreme Court promulgated rules relating to the Act’s bypass procedure. The Supreme Court did so -- 10 years later, in 2006. On the defendants’ motion to dissolve the injunction, the district court concluded that the Act was unconstitutional because the bypass procedure failed to provide a mechanism for consent for a petitioner who failed to establish the requisite maturity level but who successfully established that it was in her best interest to waive notice. The defendants appeal.
While a classroom assistant in the Indianapolis Public School system ("IPS"), Angela Brooks-Ngwenya developed a program she called Transitioning Into Responsible Students (“TIRS”). When IPS did not offer Brooks-Ngwenya a permanent job, she brought suit for race discrimination. She and IPS settled the suit in 2004. She later brought a second suit, alleging that IPS infringed her copyright in TIRS, to which she added a claim for employment discrimination. The district court granted summary judgment to IPS. Brooks-Ngwenya appeals.
James Stilwell took out a $4 million life insurance policy with American General Life Insurance Company (“American General”). His wife and daughters were the beneficiaries. The policy allowed assignments but provided that no assignment would bind American General unless filed and recorded by American General. In 1999, in order to guarantee financing for his business, Stilwell made two assignments of the policy, each in the amount of $2 million, to Janko Financial Group. The next year, Janko assigned its rights to Tuscola, a related company created by Janko to handle the financing. Tuscola entered into a new agreement with Stilwell and reduced one $2 million guarantee to $1.25 million. Janko notified American General of the assignment on a form created in part by Stilwell’s agent and modified by Janko. American General received the form but recorded it as a release instead of an assignment. Mrs. Stilwell executed additional assignments to Tuscola in the amount of $250,000 and First Mid-Illinois Bank in the amount of $1 million. James died in 2003, owing Tuscola and the Bank (mostly Tuscola) $512,000. Tuscola and the Bank applied to American General for payment, referencing the $3.25 million in assignments. American General originally indicated that it had a record of the release of the two assignments in 1999. After Janko explained the reason for the form, American General reversed its position and paid the claim. American General paid other claims and remitted the balance to Mrs. Stilwell and her children. Mrs. Stilwell brought this action against American General, alleging that it overpaid Tuscola. She alleged that the 1999 assignments were released and the 2000 assignment to Tuscola was only $250,000. The district court granted summary judgment to American General. Mrs. Stilwell appeals.