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Guest Commentary: So you want to collaborate?
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, including Eisai Co. Ltd. and Johns Hopkins University, Gilead Science and Yale School of Medicine, Sanofi-Aventis and Columbia University, Sanofi-Aventis and Harvard University, Sanofi-Aventis and the University of California San Francisco (UCSF), Pfizer and UCSF, Bayer Healthcare and UCSF and GlaxoSmithKline and Harvard University.
The goal of these collaborations is to bring together the most brilliant minds in industry and academia to discover a new wave of pharmaceutical drugs. While exciting and promising, such collaborations have the potential to spawn contentious disputes that can lead to costly litigation or 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 pays Institute a 1-percent royalty on sales of the Licensed Product if it is covered by Institute's know-how, a 2-percent royalty if the Licensed Product is covered by a patent co-owned by Institute and Pharma and a 3-percent royalty if the Licensed Product is covered by a patent solely-owned by Institute.
The agreement also provides that the party owning a patent application has the right to control its prosecution (the communications with the Patent Office regarding the patent application). Thus, Pharma and Institute jointly control prosecution of co-owned patent applications.
Institute hires a postdoctoral research assistant ("Post-doc"), who agrees to assign his invention to Institute. Post-doc discovers a new method of making a new family of chemical compounds, makes one compound and leaves Institute for a permanent position. Post-doc's method and compound 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 duly reports his results to Pharma's patent department, triggering the following analysis:
To patent this new family of compounds, there are two competing options: (a) claim a broad genus of compounds that includes both Post-doc's and Scientist's compounds, or (b) claim a narrower genus that includes 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-doc assigned his rights to Institute, Institute would be a co-owner of the patent. Thus, Pharma and Institute would (1) share control of prosecuting the patent application(s) and (2) Pharma would pay Institute a 2-percent patent royalty even if only Scientist's compound makes it to the market.
Option (b), the narrow genus, provides several advantages to Pharma. The narrower patent is more difficult for third parties to invalidate. Moreover, disclosing but not claiming Post-doc's method and compound in the patent excludes others from using Scientist's compound but does not exclude Pharma from using Post-doc's compound. Under this option, Pharma is the sole owner with complete control of the patent application and pays Institute only a 1-percent royalty if Scientist's compound makes it to the market.
Institute could challenge inventorship of the resulting patent if Scientist's compound makes it to the market. Institute would argue that (1) Post-doc provided the method of making Scientist's compound and thus is an inventor, and (2) Institute, a co-owner of the patent through Post-doc's assignment, should get the higher royalty. However, Institute would face an uphill battle for at least two reasons. One, inventorship of an issued patent is presumed to be correct. Thus, Institute would have to prove that Post-doc is an inventor by clear and convincing evidence, a difficult threshold to meet. Two, inventorship is determined based on the claimed invention, and Post-doc's method and compound are not claimed in the patent. For Post-doc to be an inventor, Institute would have to convince a court or arbitral panel that Post-doc's method was a significant contribution to the claimed invention.
Pharma chooses to purse option (b). A patent is issued claiming the narrow genus of compounds and disclosing Post-doc's method of making the claimed compounds. For good measure, a paper coauthored by Post-doc and Scientist is published, crediting Post-doc for both his and Scientist's compounds. Presumably, all are happy? Not so fast.
Scientist's compound makes it to the market. When Institute learns that Post-doc is not named as an inventor of the patent, and thus Institute is not a co-owner and does not get the 2-percent royalty, Institute sues Pharma. A costly litigation ensues. Pharma argues that Post-doc is not an inventor because his method was publicly known and his compound was not claimed in the patent.
Institute presents evidence showing (1) that there was a collaboration between Pharma and Institute, (2) that Post-doc told Pharma his method of making the compounds, (3) that both the method and the genus of compounds are new and patentable, (4) that Pharma's patent claims a subset of the new compounds and (5) that Scientist made his compound by using Post-doc's method.
The court rules that Post-doc is a joint inventor because he made 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's assignment.
Angered by Pharma's actions of disclosing and disclaiming Post-doc's invention without permission, co-owner Institute refuses to give its necessary consent to Pharma to enforce the patent against infringers, alleging that Pharma breached the contractual duty to cooperate. Without Institute's consent, Pharma no longer has the ability to sue others. Another costly dispute ensues.
It may seem that these disputes could be avoided by pursuing option (a). However, the outcome of inventorship disputes is notoriously unpredictable. The odds are against the party challenging inventorship because that party must prove its case by clear and convincing evidence. A thorough understanding of the nuances of U.S. inventorship law is, thus, crucial from the outset of a collaboration.
The recently enacted America Invents Act ("AIA") makes numerous changes to the U.S. patent system, but leaves inventorship law largely unchanged.
Joint inventorship of a U.S. patent exists when two or more individuals 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 time as the other joint inventors, but must contribute in some significant manner to the invention. Suggesting what was already well known in the prior art is not an inventive contribution, nor is the mere act of reducing another's conception to practice if the party applies only ordinary skill to optimize certain aspects of the invention.
In the above hypothetical, Post-doc's inventorship is based on his contribution to both the new method and new compound. However, if a compound 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 joint inventorship. In this scenario, the existence of a similar compound in the public domain might make Post-doc only an inventor of his own compound, not the claimed genus of compounds. Without more, Post-doc's contribution to a method of 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 element of joint collaboration. In the above hypothetical, Scientist seeing the weekly report on Post-doc's method and compound and building upon it is likely sufficient to establish the required joint collaboration. If, however, Scientist independently invented the new compounds, tested his idea with Post-doc's compound, and made his own compound, Post-doc's report to Pharma might not be enough to satisfy the joint collaboration requirement to make Post-doc a joint inventor.
Another potential thorny issue in collaborations is the interplay between inventive contribution and patent ownership. As discussed, there is no minimum quantity or quality of inventive contribution required of a joint inventor. Yet, a joint inventor is an owner of an undivided interest in the entire patent. In other words, a joint inventor, even if his contribution is minor but legally "significant," is a joint owner of the entire patent.
This can create serious problems. Because so much depends on patent ownership, a party making a somewhat minor but still legally "significant" contribution to a patent can alter the ownership and upset the tenuous balance of control and compensation set forth in the parties' agreement. Under the specific circumstances here, Pharma's broad disclosure and narrow claiming causes considerable uncertainty, making it difficult for the parties to reach a reasonable resolution without litigation or arbitration.
By combining their ingenuity in a collaboration, industry and academia, for better or worse, become partners with both shared and diverse interests. As a result, the already complex inventorship matrix is made even more challenging. Nevertheless, there are some things that can help make this journey successful. A healthy collaboration depends on (a) properly determining patent inventorship and (b) fairly rewarding contribution.
To properly determine patent inventorship, the following questions 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 be addressed: How much did each contribute? How can the invention be most effectively protected? How can each party's contributions be properly rewarded?
While there is no sure-fire way to completely eliminate disagreements between scientific collaborators, following the author's suggestions will go a long way toward minimizing costly and disruptive disputes and better enable the parties to focus on scientific and financial matters, rather than legal issues.
Thomas W. Banks is a partner and Dr. Ian Y. Liu is an associate in Finnegan's Cambridge, Mass., office. With more than 375 intellectual property lawyers, Finnegan is one of the largest intellectual property law firms in the world.