Inventorship, Ownership Issues Cause Dismissal of Suit

03 August 2015 Personalized Medicine Bulletin Blog

On July 22, 2015, the U.S. District Court for the District of Maryland dismissed a long standing patent infringement suit brought by StemCells, Inc. against Neuralstem, Inc., on the ground that all those with an ownership interest in the patents-in-suit did not voluntarily join as plaintiffs in the action. StemCells, Inc v. Neuralstem, Inc., Case No. 06-cv-187-RWT (D. Md. July 22, 2015). The decision highlights that even informal agreements among collaborators can be construed as assignments of inventions and that there is often a difference of opinion, even among experts, as to who made an inventive contribution to a patent filing.

The Patents-in-Suit and Agreements

The patents-in-suit (“patents”) are U.S. Patent Nos.: 5,851,832; 6,497,872; 7,101,709; 7,115,418; and 7,361,505, which are all continuations-in-part of U.S. Serial No.: 07/726,812 (the “‘812 application”). The ‘812 application was filed on July 8, 1991, naming Drs. Samuel Weiss and Brent Reynolds as co-inventors. During the course of examination of the ‘812 application, inventorship was raised by the USPTO, and in particular, whether Dr. Wolfram Tetzlaff should be named as an inventor of the application. After an investigation by the attorney prosecuting the application, it was determined that Dr. Tetzlaff was not a co-inventor.

On July 3, 1991, just a few days prior to the filing of the ‘812 application, Drs. Weiss, Reynolds and Tetzlaff signed a memorandum (dated July 2, 1991), agreeing to divide 50% of the ownership among themselves of the potential commercial value of the invention that led to the ‘812 application (the “1991 Memo”). The remaining 50% ownership interest went to their employer, the University of Calgary, through the university’s agent, University Technologies, Inc. (“UTI”). According to the 1991 Memo, the 50% ownership interest due to the self-named inventors was to be allocated as follows: 45% to Dr. Weiss, 45% to Dr. Reynolds, and 10% to Dr. Tetzlaff.

Also on July 3, 1991, Drs. Weiss and Reynolds, but not Dr. Tetzlaff, signed an assignment purporting to assign their interest in the invention of the ‘812 application to UTI, the commercial out licensing arm of the University of Calgary. Dr. Tetzlaff was not identified as a co-inventor and did not sign the assignment document.

The University of Calgary eventually returned any rights it had in the inventions and patents to Drs. Weiss and Reynolds, who then through a series of transactions eventually assigned them to NeuroSpheres Holdings Ltd. (“NeuroSpheres”). NeuroSpheres executed license agreements with StemCells, which included patent rights in the patent applications (all continuations of the original of the ‘812 application) that matured into the patents-in-suit. StemCells then asserted them against Neuralstem in this patent infringement action.

A Question of Contribution

Almost 5 years into the lawsuit, defendant Neuralstem filed a motion to dismiss based on the discovery of the 1991 Memo. Neuralstem alleged that should Dr. Tetzlaff have a valid inventorship interest in the patents, then StemCells does not have standing since he never assigned his interested to NeuroSpheres. As a co-owner of the patents, he must join as a party-in-interest. To resolve the issue, the court evaluated whether Dr. Tetzlaff acquired an ownership interest either as a co-inventor of the patents or through the 1991 Memo that may have assigned part ownership of the patents to him.

In first deciding whether Dr. Tetzlaff is a co-inventor, the court evaluated his contributions to the invention.

The court first determined that the invention related to the growth, proliferation and use of neural cells. As stated by the court, Dr. Reynolds came into the possession of the cells that he subsequently put in culture with certain growth factors. He found that unexpectedly, the combination of growth factors not only resulted in more neurons surviving, but also increased cell proliferation.

Several facts were highlighted by the court as being key in the inventorship analysis of the discovery of the growth and proliferation of the cells. It was undisputed that the three scientists knew each other, having worked in close proximity, and that Drs. Weiss and Tetzlaff jointly submitted a 1990 grant application detailing research relating to the discovery. The 1990 grant application acknowledged that Dr. Tetzlaff coordinated all phases of the molecular biology experiments. The court also noted with interest that the three scientists co-authored several technical publications relating to the invention.

In reviewing the testimony from Drs. Weiss, Reynolds and Tetzlaff regarding the contributions of all to the discovery, the court focused on the alleged self-serving testimony of Drs. Weiss and Reynolds in that they characterized Dr. Tetzlaff’ s contribution to the invention as financial, and not technical in nature. In contrast, the court noted that Dr. Tetzlaff’ s testimony was more convincing and attributed his contribution to the collaboration as two-fold: he did the work necessary to confirm that the discovered neurons would work in animals and he performed the immunocytochemistry to confirm the types of cell that were proliferating. This work was considered by the court to be essential to determine with precision the types of cells that were proliferating. The court also noted that Dr. Tetzlaff designed the human experiments for use of the cells in humans which the court considered to be an essential part of the evolution of the discovery into a patentable invention.

Based on this evidence and the testimony of the three scientists, the court concluded that Dr. Tetzlaff was a co-inventor.

Ownership by Contract

The court then turned to the question of ownership. The agreement among the scientists to share in ownership of the “invention” was evaluated under Canadian contract law. The court stated that the 1991 Memo was confirmatory evidence of a prior oral agreement to share in the ownership interest of the discovery and profits. It was therefore determined to be an effective assignment of any ownership interest in the inventions to each of Drs. Weiss, Reynolds and Tetzlaff. The court also determined that the 1991 Memo was not preempted by the July 3, 1991 assignment to the university because the 1991 Memo was dated and effective one day prior to its signing and the July 3, 1991 assignment to the university.

A Curious Case to Ponder

This case presents a curious situation for at least two reasons. First on the issue of the informal agreements and assignments of inventions, two documents, executed on the same day presented contradictory conclusions as to ownership of the intellectual property. In determining which agreement was controlling, the court heavily relied on the fact that the 1991 Memo was dated and deemed effective one day prior to its signing, and one day prior to the execution of the assignment to the university. As it was first in time (by one day), the 1991 Memo was determined to preempt the university assignment.

Second, on the issue of inventorship, the court did not appear to consider when conception of the invention was complete and more specifically, if Dr. Tetzlaff joined after completed conception by Drs. Reynolds and Weiss, In the federal circuit’s decision of Univ. of Pittsburgh v. Hedrick, 91 USPQ2d 1423 (Fed. Cir. 2009), the court held that a scientist, who joined a project after completion of conception of the invention by others and who generated data confirming the prior conception, was not a coinventor. In that case, the Federal Circuit determined that the scientist’s whose work simply confirmed the isolation and culturing of a particular type of stem cell was thus was not a co-inventor since such work merely confirmed the conception of others. The court held that it was immaterial that the named inventors did not know with scientific certainty the cells’ inventive qualities and that others helped them gain such scientific certainty. Here, while Dr. Tetzlaff assisted with determining clinical use of the cells it is not clear from the court’s decision if such was confirmatory of prior conception by Drs. Weiss and Reynolds.

This case has been pending for some time in district court and it is not unlikely that it will continue on appeal, where a review of issues of inventorship, ownership, and standing will continue.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services

Insights

Bad Holiday Season News! Estimates of an increase of Cyberattacks 20%!
13 December 2019
Internet, IT & e-Discovery Blog
Driving the Future of Automotive Technology
12 December 2019
Manufacturing Industry Advisor
Massachusetts Governor Proposes Facility Fee Ban
12 December 2019
Health Care Law Today
American Rule Prevails; PTO May Not Collect In-House Attorneys' Fees as "Expenses"
12 December 2019
IP Litigation Current
ACCC 46th Annual Meeting & Cancer Center Business Summit
04-05 March 2020
Washington, D.C.
Foley/Deloitte Compliance and Privacy Officer Roundtable
27 February 2020
Boston, MA
Let’s Talk Compliance
24 January 2020
Orlando, FL
New England Alliance Annual Meeting
15-17 January 2020
Woodstock, VT