Print PDF

Dispute over TNF-BP Protein Continues

March 15, 2005

Decision icon Decision

Last Month at the Federal Circuit - April 2005

Judges: Prost (author), Bryson, and Gajarsa

In Israel Bio-Engineering Project v. Amgen Inc., No. 04-1153 (Fed. Cir. Mar. 15, 2005), the Federal Circuit addressed two appeals based on the same district court decision. In one appeal, addressing issues of Israeli contract law and Israeli labor and intellectual property law, the Federal Circuit affirmed-in-part and reversed-in-part the district court’s decision, and remanded the case back to the district court for further proceedings. In the other appeal, the Federal Circuit reversed the district court’s decision denying a motion to intervene filed by Inter-Lab Ltd. and Serono International S.A. (collectively “the Serono parties”).

The dispute centered on the interpretation of several agreements that affect ownership of certain patents directed to a protein that is useful in treating rheumatoid arthritis. In September 1981, Inter-Yeda Ltd. (“Inter-Yeda”) and Yeda Research and Development Company, Ltd. (“Yeda”) entered into a five-year agreement (“1981 contract”). Under that agreement, Inter-Yeda provided financial support to various Yeda research projects, one of which focused on anticellular factor research. In December 1982, Israel Bio-Engineering Project (“IBEP”) and Inter-Yeda
entered into two separate five-year agreements, both expiring in December 1987. A first December 1982 agreement called for IBEP to fund Inter-Yeda’s financial obligations under its 1981 contract with Yeda (“Sub-R&D Agreement”), including funding the research on anticellular factor research. Under the Sub-R&D Agreement, IBEP gained ownership of any discoveries made as a result of the research funded by IBEP. Also, the Sub-R&D Agreement was to be governed under Israeli law.

A second December 1982 agreement, the Technology Option and Sale Agreement (“TOS Agreement”), granted Inter-Yeda an option to purchase the rights and title to any discoveries owned by IBEP as a result of research conducted under the Sub-R&D Agreement.

In April 1987, researchers affiliated with Inter- Yeda and Yeda discovered a tumor necrosis factor inhibitory protein (“TNF-BP”), which later proved useful in treating rheumatoid arthritis. By that time, the 1981 contract between Inter-Yeda and Yeda had expired, but neither the Sub-R&D Agreement nor the TOS Agreement had yet expired. Asserting that the discovery resulted from anticellular factor research it had funded, IBEP claimed ownership of the discovery. however, ownership was never transferred to IBEP and U.S. Patent No. 5,981,701 (“the ‘701 patent”), which issued from the discovery, was assigned to Yeda.

The first appeal addressed by the Federal Circuit focused on the alleged infringement of the ‘701 patent by Defendants Amgen Inc., Immunex Corp., Wyeth, and Wyeth Pharmaceuticals, Inc. In granting Defendants’ SJ motion, the district court found that Inter-Yeda and Yeda did not intend to extend their 1981 contract to 1987 and that Yeda was not bound by IBEP’s 1982 agreements with Inter-Yeda. Additionally, the district court rejected IBEP’s assertion that, under Israeli law, those involved in the TNF-BP discovery were Inter-Yeda employees, and as such, that their discovery became the property of IBEP under the 1982 Sub- R&D Agreement.

IBEP appealed, arguing first that Israeli law harmonized the terms of the 1981 and 1982 contracts as a single transaction because both contracts shared a common purpose. Furthermore,
IBEP asserted that the terms of the December 1982 agreements govern. The Federal Circuit disagreed, finding that IBEP had misinterpreted the precedent upon which it had ruled.

Second, IBEP asserted that, when entering into the 1982 agreement, it intended to own any resulting discoveries conducted by either Inter- Yeda or Yeda during the five-year term of those agreements. Finding against IBEP, the Federal Circuit stated that after considering extrinsic evidence of IBEP’s intent, which is allowed by Israeli law, IBEP’s intentions entering the December 1982 agreements played no role in interpreting the intent of the parties involved in the 1981 agreement because IBEP was not a party to the 1981 agreement. Thus, the Federal Circuit affirmed the district court’s grant of SJ.

However, the Federal Circuit did reverse the district court’s finding that the researchers responsible for the TNF-BP discovery were not IBEP employees by virtue of the Sub-R&D Agreement and remanded the issue back to the district court. Additionally, the Federal Circuit found that the district court had failed to analyze IBEP’s assertion that three other inventors were Inter-Yeda employees at the time of the invention.

The second appeal addressed by the Federal Circuit focused on the district court’s denial of the Serono parties’ motion to intervene. The lower court found that Yeda, who had successfully intervened as a Defendant in the case, adequately represented their interests. However, the Federal Circuit reversed that finding, concluding that the Serono parties intended to file against IBEP a defense of laches, which is personal to the Serono parties. Also, the Serono parties argued that they, and not Yeda, have an option to purchase the rights to any discoveries resulting from the anticellular factor research at issue in this case under the TOS Agreement. Again, this argument is specific and personal to the Serono parties and cannot be adequately represented by Yeda.