Federal Circuit Finds R&D Agreement Did Not Vest Full Ownership of Patent since Patent Developed Outside of R&D Period

In Israel Bio-Engineering Project v. Amgen, Inc., 475 F.3d 1256, 81 USPQ2d 1558 (Fed. Cir. 2007), IBEP, a New York based limited partnership, entered into a series of financing contracts with Inter-Yeda, a joint venture of Yeda and Inter-Pharm.  Yeda and Inter-Pharm are Israeli firms funding and commercializing research performed at the Weizmann Institute of Science.  Separately, Yeda and Inter-Yeda agreed that Inter-Yeda would obtain financing for their venture.  There were two contracts of interest between IBEP and Inter-Yeda.  The first contract was an “R&D Contract,” which provided that Inter-Yeda would seek patents on all inventions resulting from the R&D Programs and that all rights to such patents and patent applications forming part of the Proprietary Information was to be assigned to IBEP.  The terms and conditions of the Sub-R&D Contract were consistent with the second contract, the “Technology Option and Sale” contract, which provided specifically that all proprietary information developed during the term of the R&D agreement would become the sole property of IBEP (subject to a buyout right by Inter-Yeda that was not exercised).  The contracts excluded from coverage pre-existing technologies not developed during the term of the R&D contract.  The R&D contract term expired December 27, 1987, and the Technology Option andSale contract expired September 14, 1985. 

In April of 1987, after the expiration of the Technology Option andSalecontract but while R&D contract was in effect, scientists working under the R&D project discovered TBF, a protein ultimately used to treat rheumatoid arthritis.  This discovery was patented in U.S. Patent 5,981,701 (the “’701 patent”), which issued November 9, 1999, naming among others Wallach and Rubinstein as inventors, and was assigned to Yeda.  Of the three claims of the ‘701 patent, only the subject matter of claim 1, relating to the protein itself, was invented during the R&D contract term.  The subject matter of claim 2 and 3 however, relating to the protein and including amino acid sequences, uses and delivery methods, was invented after the expiration of the R&D contract in 1988, and was based on the research of Rubinstein.  However, IBEP claimed that Wallach had conducted similar research in 1987, prior to the end of the R&D contract, and on which Rubinstein’s work followed such that ownership fully vested in IBEP under the terms of the R&D contract.

In 2002, IBEP filed an infringement action against Amgen, claiming infringement of claim 1 of the ‘701 patent.  Yeda intervened, motioning for summary judgment against IBEP.  Yeda asserted that because the inventors of the ‘701 patent were not Inter-Yeda employees at the time of the R&D agreement, they could not assign that invention to Inter-Yeda under Israeli law; thus, Inter-Yeda could not assign the patent to IBEP and therefore IBEP had no rights in the patent.  The District Court granted the motion; IBEP appealed.  The Federal Circuit reversed and remanded, finding that there were genuine issues of material fact concerning whether the inventors were employees at the time of the invention under Israeli law.  Yeda again motioned for summary judgment, claiming IBEP lacked standing.  Claims 2 and 3, according to Yeda, resulted from research conducted in 1988, after the expiration of the R&D contract.  Therefore, Yeda claimed, IBEP had only a partial interest in the patent, not full ownership and couldn’t sue.  The District Court agreed; IBEP again appealed.

On appeal, the Federal Circuit agreed with the District Court’s conclusions that IBEP had no standing on infringement due to the fact that Rubinstein was a co-inventor of subject matter of claims 2 and 3, which was not discovered until after the expiration of the R&D program.  Citing Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998), Beech Aircraft Corp. v. EDO Corp., 990 F.2d 1237 (Fed. Cir. 1993) and Jones v. Hardy, 727 F.2d 1524 (Fed. Cir. 1984), the Federal Circuit restated the rule that each claim of patent is its own invention, and joint inventors claim pro rata ownership in the full patent despite making unequal contributions.  A consequence of this rule is that, since IBEP did not have full ownership, it had no standing to sue.  Specifically, without the joinder of Yeda (by assignment from Rubinstein), IBEP had no standing to sue Amgen.  Rubinstein/Yeda, co-owner of the patent through claims 2 and 3, did not join in the action.  IBEP, through claim 1, was at most only a co-owner of the ‘701 patent.  The Court again cited Ethicon’s holding that all patent co-owners must join as plaintiffs in an infringement suit.

In response, IBEP disputed that Yeda was a co-owner since the R&D contract should apply to any invention resulting from the R&D performed under the R&D contract.  IBEP claimed that any construction that gave it anything less than exclusive ownership rights was contrary to their contractual intent.  However, the Federal Circuit used the strict language of the R&D contract, noting its clearly finite duration and associated coverage for the assignment.  The Court read this duration in conjunction with the “resulting from” provision to conclude that, as a whole, the rights pertained to inventions only discovered as a result of research during the exact contract term; not after.  The Federal Circuit found similar language in the Technology Sale contract, which supported the construction that the assignment only applied to R&D conducted during the contractual duration.  In addition, to the extent that Rubinstein’s work built upon Wallach’s, which occurred during the R&D program, IBEP never claimed that the subject matter of claims 2 and 3 was discovered during the contract term and did not bring breach of contract claims for failure to assign all rights in these claims.  Therefore, the Federal Circuit affirmed the  District Court since the subject matter of claims 2 and 3 was outside of the scope of the R&D agreement, making Yeda a co-owner of the ‘701 patent who did not consent to the suit.  Without the consent of Yeda, the Federal Circuit affirmed that IBEP had no standing to sue Amgen on infringement.

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