By Thomas W. Banks and Ian Y. Liu, Finnegan
On Nov. 28, 2011, the University of Cambridge and Elan Corp.launched the Cambridge-Elan Center for Research Innovation and Drug Discovery.This came on the heels of several other pharma-academic alliances, includingEisai Co. Ltd. and Johns Hopkins University, Gilead Science and Yale School ofMedicine, Sanofi-Aventis and Columbia University, Sanofi-Aventis and HarvardUniversity, Sanofi-Aventis and the University of California San Francisco(UCSF), Pfizer and UCSF, Bayer Healthcare and UCSF and GlaxoSmithKline andHarvard University.
The goal of these collaborations is to bring together themost brilliant minds in industry and academia to discover a new wave ofpharmaceutical drugs. While exciting and promising, such collaborations havethe potential to spawn contentious disputes that can lead to costly litigationor arbitration.
Consider the following hypothetical. Pharmaceutical Company("Pharma") collaborates with Research Institute ("Institute") to develop a drug("Licensed Product"). The parties' agreement provides that Pharma paysInstitute a 1-percent royalty on sales of the Licensed Product if it is coveredby Institute's know-how, a 2-percent royalty if the Licensed Product is coveredby a patent co-owned by Institute and Pharma and a 3-percent royalty if theLicensed Product is covered by a patent solely-owned by Institute.
The agreement also provides that the party owning a patentapplication has the right to control its prosecution (the communications with thePatent Office regarding the patent application). Thus, Pharma and Institutejointly control prosecution of co-owned patent applications.
Institute hires a postdoctoral research assistant("Post-doc"), who agrees to assign his invention to Institute. Post-docdiscovers a new method of making a new family of chemical compounds, makes onecompound and leaves Institute for a permanent position. Post-doc's method andcompound are reported to Pharma in a weekly report.
Learning of Post-doc's method, a Pharma scientist("Scientist") makes a new compound using Post-doc's method. Scientist dulyreports his results to Pharma's patent department, triggering the followinganalysis:
To patent this new family of compounds, there are twocompeting options: (a) claim a broad genus of compounds that includes bothPost-doc's and Scientist's compounds, or (b) claim a narrower genus thatincludes only Scientist's compound.
Option (a), the broad genus, prevents others from making,using or selling any compound within the claimed genus. However, under option(a), Post-doc would be a co-inventor of the patent and, because Post-docassigned his rights to Institute, Institute would be a co-owner of the patent.Thus, Pharma and Institute would (1) share control of prosecuting the patentapplication(s) and (2) Pharma would pay Institute a 2-percent patent royaltyeven if only Scientist's compound makes it to the market.
Option (b), the narrow genus, provides several advantages toPharma. The narrower patent is more difficult for third parties to invalidate.Moreover, disclosing but not claiming Post-doc's method and compound in thepatent excludes others from using Scientist's compound but does not excludePharma from using Post-doc's compound. Under this option, Pharma is the soleowner with complete control of the patent application and pays Institute only a1-percent royalty if Scientist's compound makes it to the market.
Institute could challenge inventorship of the resultingpatent if Scientist's compound makes it to the market. Institute would arguethat (1) Post-doc provided the method of making Scientist's compound and thusis an inventor, and (2) Institute, a co-owner of the patent through Post-doc'sassignment, should get the higher royalty. However, Institute would face anuphill battle for at least two reasons. One, inventorship of an issued patentis presumed to be correct. Thus, Institute would have to prove that Post-doc isan inventor by clear and convincing evidence, a difficult threshold to meet.Two, inventorship is determined based on the claimed invention, and Post-doc'smethod and compound are not claimed in the patent. For Post-doc to be aninventor, Institute would have to convince a court or arbitral panel thatPost-doc's method was a significant contribution to the claimed invention.
Pharma chooses to purse option (b). A patent is issuedclaiming the narrow genus of compounds and disclosing Post-doc's method ofmaking the claimed compounds. For good measure, a paper coauthored by Post-docand Scientist is published, crediting Post-doc for both his and Scientist'scompounds. Presumably, all are happy? Not so fast.
Scientist's compound makes it to the market. When Institutelearns that Post-doc is not named as an inventor of the patent, and thusInstitute is not a co-owner and does not get the 2-percent royalty, Institutesues Pharma. A costly litigation ensues. Pharma argues that Post-doc is not aninventor because his method was publicly known and his compound was not claimedin the patent.
Institute presents evidence showing (1) that there was acollaboration between Pharma and Institute, (2) that Post-doc told Pharma hismethod of making the compounds, (3) that both the method and the genus ofcompounds are new and patentable, (4) that Pharma's patent claims a subset ofthe new compounds and (5) that Scientist made his compound by using Post-doc'smethod.
The court rules that Post-doc is a joint inventor because hemade an inventive contribution to the method of making the claimed compounds,even though Pharma's patent does not claim Post-doc's method or compound.Accordingly, Institute becomes a co-owner of the patent through Post-doc'sassignment.
Angered by Pharma's actions of disclosing and disclaimingPost-doc's invention without permission, co-owner Institute refuses to give itsnecessary consent to Pharma to enforce the patent against infringers, allegingthat Pharma breached the contractual duty to cooperate. Without Institute'sconsent, Pharma no longer has the ability to sue others. Another costly disputeensues.
It may seem that these disputes could be avoided by pursuingoption (a). However, the outcome of inventorship disputes is notoriouslyunpredictable. The odds are against the party challenging inventorship becausethat party must prove its case by clear and convincing evidence. A thoroughunderstanding of the nuances of U.S. inventorship law is, thus, crucial fromthe outset of a collaboration.
The recently enacted America Invents Act ("AIA") makesnumerous changes to the U.S. patent system, but leaves inventorship law largelyunchanged.
Joint inventorship of a U.S. patent exists when two or moreindividuals contribute to the conception of an invention claimed by the patent.A joint inventor need not work in the same physical space or at the same timeas the other joint inventors, but must contribute in some significant manner tothe invention. Suggesting what was already well known in the prior art is notan inventive contribution, nor is the mere act of reducing another's conceptionto practice if the party applies only ordinary skill to optimize certainaspects of the invention.
In the above hypothetical, Post-doc's inventorship is basedon his contribution to both the new method and new compound. However, if acompound similar to Post-doc's or Scientist's compounds was previously known,Post-doc's method, even if novel, might not entitle Post-doc to jointinventorship. In this scenario, the existence of a similar compound in thepublic domain might make Post-doc only an inventor of his own compound, not theclaimed genus of compounds. Without more, Post-doc's contribution to a methodof making Scientist's compound may not be enough to make Post-doc an inventor.
For one to be a joint inventor, there must be some elementof joint collaboration. In the above hypothetical, Scientist seeing the weeklyreport on Post-doc's method and compound and building upon it is likelysufficient to establish the required joint collaboration. If, however,Scientist independently invented the new compounds, tested his idea withPost-doc's compound, and made his own compound, Post-doc's report to Pharmamight not be enough to satisfy the joint collaboration requirement to makePost-doc a joint inventor.
Another potential thorny issue in collaborations is theinterplay between inventive contribution and patent ownership. As discussed,there is no minimum quantity or quality of inventive contribution required of ajoint inventor. Yet, a joint inventor is an owner of an undivided interest inthe entire patent. In other words, a joint inventor, even if his contributionis minor but legally "significant," is a joint owner of the entire patent.
This can create serious problems. Because so much depends onpatent ownership, a party making a somewhat minor but still legally"significant" contribution to a patent can alter the ownership and upset thetenuous balance of control and compensation set forth in the parties'agreement. Under the specific circumstances here, Pharma's broad disclosure andnarrow claiming causes considerable uncertainty, making it difficult for theparties to reach a reasonable resolution without litigation or arbitration.
By combining their ingenuity in a collaboration, industryand academia, for better or worse, become partners with both shared and diverseinterests. As a result, the already complex inventorship matrix is made evenmore challenging. Nevertheless, there are some things that can help make thisjourney successful. A healthy collaboration depends on (a) properly determiningpatent inventorship and (b) fairly rewarding contribution.
To properly determine patent inventorship, the followingquestions must be frequently asked, answered, and revisited: What was invented?Who invented what? With whom? To what extent did one communicate to the other?What was disclosed? To whom?
To fairly reward contribution, the following topics must beaddressed: How much did each contribute? How can the invention be mosteffectively protected? How can each party's contributions be properly rewarded?
While there is no sure-fire way to completely eliminatedisagreements between scientific collaborators, following the author'ssuggestions will go a long way toward minimizing costly and disruptive disputesand better enable the parties to focus on scientific and financial matters,rather than legal issues.
Thomas W. Banks is a partnerand Dr. Ian Y. Liu is an associate in Finnegan's Cambridge, Mass., office. Withmore than 375 intellectual property lawyers, Finnegan is one of the largestintellectual property law firms in the world.