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Patentee Lacks Standing When It Cannot Establish Sole Ownership of the Patent Maximilienne Bishop

06-1218
January 29, 2007
Giannelli Ph.D., Maximilienne

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Last Month at the Federal Circuit - February 2007

Judges: Bryson, Prost, Saris (author, sitting by designation)

[Appealed from: C.D. Cal., Judge Klausner]

In Israel Bio-Engineering Project v. Amgen, Inc., No. 06-1218 (Fed. Cir. Jan. 29, 2007), the Federal Circuit affirmed the district court’s grant of SJ that Israel Bio-Engineering Project (“IBEP”) lacked standing to bring suit because it did not have sole ownership of U.S. Patent No. 5,981,701 (“the ’701 patent”).

The dispute over ownership involves four related contracts. First, in 1981, Yeda Research and Development Company, Ltd. (“Yeda”) contracted with Inter-Yeda Ltd. (“Inter-Yeda”), a joint venture between Yeda and Inter-Pharm, an Israeli company owned by Serono International S.A. (“Serono”), to finance four research projects at the Weizmann Institute of Science. Yeda offered to cooperate with Inter-Yeda in revising the contract if it found outside funding. Inter-Yeda then began negotiating with IBEP to secure funding for the Weizmann research projects.

The second contract, which was between IBEP and the State of Israel, committed IBEP to spend $7 to $10 million funding the four research projects.

In the third contract, referred to as the Sub-R&D Contract, IBEP agreed with Inter-Yeda that it would fund research conducted by Inter-Yeda and Yeda. This contract contained two terms central to the issues on appeal. First, Paragraph IX(A) granted IBEP all rights, title, and interest in and to patents and patent applications “resulting from the R&D Programs.” (Emphasis in original.) Paragraph X(A) provided that IBEP would be assigned rights, title, and interest in and to “Proprietary Information,” and this term was defined as “inventions, patent applications and patents . . . developed in the R&D programs.” (Emphasis in original.)

Finally, the fourth contract, the Technology Option and Sale Agreement (“the TOS Contract”) between IBEP and Inter-Yeda, provided that IBEP would become the sole owner of all proprietary information “developed during the term of the Sub-R&D Agreement,” subject to the right of Inter-Yeda to exercise an option to purchase those rights. (Emphasis in original.) The TOS Contract provided that when products were reduced to practice after the termination of the Sub-R&D Contract, IBEP would only be entitled to royalty payments.

Yeda and Inter-Yeda amended their 1981 agreement (the first in the series of four) to provide that “new results” discovered during the “Project Term” with IBEP would belong to IBEP immediately upon discovery or development. The “Project Term” was defined as the five-year period following the execution of the Yeda/Inter-Yeda agreement on September 14, 1981.

All agreements between IBEP and either Inter-Yeda or the State of Israel were set to expire on December 27, 1987, and were to be construed in accordance with the laws of Israel. In April 1987, scientists David Wallach, Hartmut Engelmann, and Daniel Aderka discovered the Tumor Necrosis Factor Binding Protein (“TBP”) in human urine and partially purified it. The protein, when bound to the Tumor Necrosis Factor (“TNF”), combats rheumatoid arthritis. Wallach partially purified TBP, and, prior to the expiration of the IBEP/Inter-Yeda agreement, attempted (but apparently failed) to substantially purify it. After the expiration of the Sub-R&D Contract, Dr. Menachem Rubinstein began working on further purifying TBP. He succeeded in obtaining the protein in “substantially purified” form. TBP is the subject of the ’701 patent assigned to Yeda. The ’701 patent has three claims. The first concerns a protein from human urine capable of binding to TNF and inhibiting TNF’s cytotoxic effect. The subject matter of claim 1 was discovered prior to the expiration of the Sub-R&D Contract. Claims 2 and 3 concern the “substantially purified” TBP, which was obtained after the expiration of the Sub-R&D Contract.

In 2002, IBEP filed suit alleging that Amgen, Inc., Immunex Corporation, Wyeth, and Wyeth Pharmaceuticals (collectively “Amgen”) infringed claim 1 of the ’701 patent with the drug Enbrel®. Shortly thereafter, Yeda and Serono moved to intervene; only Yeda prevailed. In 2003, Yeda moved for SJ that IBEP did not have sole ownership of the ’701 patent because the inventors were not Inter-Yeda employees at the time of the agreement. The district court granted SJ. IBEP appealed. The Federal Circuit reversed, holding that genuine issues of material fact existed as to whether the inventors were Inter-Yeda employees at the time of the invention. But in its opinion, the Court stated that even if IBEP could show that some inventors were Inter-Yeda employees, it would have to join all patent co-owners to establish standing.

On cue, Yeda moved for SJ that IBEP lacked standing, arguing that claims 2 and 3 of the ’701 patent were invented after the project term, and therefore, full title to the patent could not have passed to IBEP under the Sub-R&D Contract. The district court granted the motion. IBEP appealed. The key issue on appeal was whether IBEP was the sole exclusive owner of the ’701 patent, such that it had standing to bring the infringement action. IBEP argued that it owned all rights to the ’701 patent, including claims 2 and 3. It relied on a provision in the Sub-R&D Contract providing that IBEP was entitled to inventions “resulting from the R&D Program,” as opposed to those developed during the program term. Yeda countered that IBEP was not entitled to inventions made after the termination of the Sub-R&D Contract. Yeda relied on language in the Sub-R&D Contract providing that IBEP was entitled to rights in inventions “developed in the R&D programs.”

The Federal Circuit first addressed whether IBEP had waived its argument, because IBEP had not relied on the “resulting from” language in the district court. But in the district court, IBEP had based its argument on Paragraph IX of the Sub-R&D Contract, i.e., the paragraph containing the newly relied upon “resulting from” language. The Court held that “[b]ecause the parties argued about the meaning of this paragraph in the district court, we conclude they are not bound by the precise arguments raised below.” Slip op. at 16.

Turning to the merits of the argument, the Federal Circuit, relying on Israeli law, held that IBEP was not entitled to inventions developed after the R&D program expired. The Court noted that the agreement was finite in nature. It also referred to the related TOS Contract, which contained language referring to inventions “developed in the R&D programs,” which means “developed during the term of the Sub-R&D Agreement.” (Emphasis in original.) The TOS Contract detailed the parties’ rights regarding research building on the R&D program after the expiration of the contract, and said only that IBEP was entitled to royalties, not ownership. Therefore, the Court held that IBEP was not entitled to further assignments after the R&D program ended.

IBEP presented alternative arguments, and the Federal Circuit rejected each in turn. First, the Court held that Inter-Yeda did not forfeit its rights to claims 2 and 3 by combining them with claim 1 in a single patent, the ’701 patent. The Court noted that the Sub-R&D Contract allowed Inter-Yeda to file for patents at its discretion, and therefore, Inter-Yeda could aggregate claims to inventions developed after the R&D program with those developed within the program.

Next, the Federal Circuit rejected IBEP’s argument that it was entitled to full ownership of the ’701 patent because patent assignments attach to patents as a whole, not to individual claims. The Court held that “the issue was ownership of a future invention, which became the subject matter of only one claim.” Slip op. at 19.

The Court then rejected “the final twist on [IBEP’s] argument.” Id. Specifically, IBEP argued that it acquired exclusive ownership rights because the patent assignment in the Sub-R&D Contract was a present assignment of future rights. The Court held that “this strained interpretation assumes incorrectly that IBEP had an ‘expectant interest’ in Rubinstein’s post-project term invention.” Id. at 20. In addition, the Court held that it was inconsistent with the language of the contract and the intention of the parties.

Unpersuaded by any of IBEP’s arguments, the Court held that IBEP lacked standing to bring the infringement action because it did not have sole exclusive title to the ’701 patent and Yeda did not voluntarily join the action.