• Unfairly Filing Patent Applications

    by  • February 11, 2009 • patent

    Patent inventorship is defined by law, but there’s more than one way to get rewarded for it. Unjust enrichment, for example.

    Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc. is a tale of business misrepresentations and underhanded dealing, described by the court as “manifest unfairness” and “unscrupulous.” Of particular interest here is the maneuvering for ownership of patent applications.

    Dr. Joan Miller, while working for Massachusetts Eye and Ear Infirmary (MEEI), used biological materials provided by defendant QLT Phototherapeutics to develop a treatment for age-related macular degeneration. After her initial success in developing the treatment, she and QLT executed a preclinical agreement for QLT to fund her further research. The parties also signed confidential disclosure agreements and additional material transfer agreements.

    QLT then shopped the new treatment to CIBA Vision. Contrary to the terms of the confidential disclosure and material transfer agreements, QLT disclosed confidential information to CIBA Vision and also eventually convinced Dr. Miller to present her findings to CIBA Vision directly. The parties had not yet negotiated a license agreement, but QLT persuaded Dr. Miller to go ahead by promising that QLT would enter into a license with MEEI on fair terms. Dr. Miller met with CIBA Vision and was persuasive; as a result of her presentation CIBA Vision ultimately executed an agreement with QLT.

    When it was time to file a patent application, QLT offered its patent attorney but said that it was not an inventor. QLT promised to compensate MEEI based on the assumption that MEEI would be the sole owner of the patent.

    QLT’s patent attorney drafted an application with three listed inventors, all from MEEI. QLT later told MEEI that in its opinion the part of the patent specifically addressing age-related macular degeneration had to be refocused in light of prior art. At the same time it told CIBA Vision that it wanted to maintain control of the application process, but could only use persuasion to do so since it had no inventors on the patent.

    QLT then suggested to MEEI amending the application in a way that would add QLT as an inventor. MEEI balked over a concern that adding inventors from other entities would also reduce its royalties. QLT assured MEEI that MEEI would be compensated as if it was the sole inventor. MEEI acquiesced, so the original application was cancelled and continuations-in-part filed, this time listing inventors from MEEI, Massachusetts General Hospital and QLT.

    Then the licensing negotiations began. As the court put it, “it became clear that they entertained diametrically opposed notions of what constituted a ‘fair business arrangement.'” QLT’s position was now it was free “as a co-assignee to practice the invention independently,” although it offered to still come to an agreement on reasonable terms. Not surprisingly, terms were never reached and the lawsuit filed.

    Note that the decision is out of the First Circuit, not the Federal Circuit. Despite the overarching patent background of the case, it did not involve a question of patent law.

    We previously noted that although the proper inventorship of the patent applications at issue is a non-negotiable question of federal patent law, the question of which application to prosecute was a choice available to the parties. Consequently, . . . if QLT induced MEEI to abandon a more limited claim (embodied in the ‘473 application or a similar MEEI-only application that did not raise prior art issues) in favor of the broader ‘591 claim by promising compensation, and then did not pay such compensation, QLT would be unjustly enriched.

    QLT argued that for unjust enrichment the benefit conferred had to be a patent benefit; the court disagreed. QLT also argued that the court shouldn’t assume that the original patent would have been valid, but the court noted that enrichment occurred regardless of the validity of any patent that would have issued from the original application: to wit, without the broadened application, QLT would have had significant challenges to its ownership of essential rights at a time when it was in critical negotiations with CIBA Vision. “[T]here was sufficient evidence that MEEI’s cooperation in the patent application process constituted a detriment to MEEI and conferred a benefit on QLT in a non-gratuitous context. In light of QLT’s vast profits and repeated promises, it would be manifestly unjust to permit QLT to retain such benefit.”

    The award of 3.01% of gross sales was affirmed.

    Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc. , 552 F.3d 47 (1st Cir. 2009). The Patent Prospector reports on the lower court decision here.

    © 2009 Pamela Chestek