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Medical patent dispute marks loose collaboration rules

07 December 2017 by Paul Harris

Medical patent dispute marks loose collaboration rules - Read more

Securing the spoils of partnership between firms and universities requires close understanding of assigning procedures

The decision of Justice Colin Birss in Accord Healthcare Limited v Research Corporation Technologies, Inc. [2017] EWHC 2711 (Ch) is destined to have businesses that deal with inventions derived from university professors scrambling to review their patent assignments. 

In the ruling, the judge considered the impact of assignments relating to an equitable right or a bare legal right, as well as the distinction between them. The decision could have serious ramifications for companies and universities in the claiming of priorities, and patent validity – and thus the flow of derived royalties.

According to whom

Complicating matters, the case considered US federal law and Texas state law, as well as English law and the approach to equitable and beneficial title to property – in this case the intellectual sort – and the legal title.

The parties in the dispute included the generic drug company Accord, the University of Houston in Texas, the defendant Research Corporation Technologies (RCT) and RCT's predecessor. The case dates back to 1966, when an agreement (the FAA Project) was entered into in which the University of Houston would offer RCT any inventions in respect of this project first.

In the present case the compound in issue was lacosamide, which in 2018 was expected to achieve worldwide sales of €1 billion. Although the basic patent expired earlier in 2017, a supplementary protection certificate was not due to expire until 2022.

This was why the claimant, Accord, sought to challenge the base patent, because if that fell, so did the certificate.

The inventor, professor Harold Kohn, and his group had been working on various amino acid compounds since the 1980s, though the discovery that lacosamide was a highly effective anti-convulsant only emerged in the mid-1990s.

A patent application in the US was filed on 15 March 1996, with the international application filed on 17 March 1997 (or within the year, the two-day discrepancy being accounted for by the weekend).

“Accord sought to challenge the base patent, because if that fell, so did the certificate”

Between those two dates, Daeock Choi, a student and part of Kohn’s team, published his PhD thesis in which the activity of lacosamide as an anti-convulsant was disclosed. It was accepted that if the priority date of the US filing could be attacked, so that the accepted date for filing the invention was the later international application, then the Choi thesis would disclose the invention.

As a prior public disclosure this would be novelty-destroying.

Ambiguous assignment

The central point of the case concerned the relationship between Kohn, the University of Houston and the procedure adopted under the 1966 FAA Project agreement in order for an invention to be vested in RCT.

It was a question of fact that Kohn was not an employee of the university, nor was he ‘paid to invent’; if he had been, the university would be the first owner of any invention. There was, however, a contractual obligation upon faculty members to assign any inventions to the university, or any legal person it appoints, such as RCT.

With the FAA Project, the university had the right (but not the obligation) to offer inventions to RCT. That required the university to make a decision whether or not to offer the invention. Equally, RCT was not obliged to accept it, even if offered. It was accepted that how offer and acceptance were communicated was irrelevant, only that these acts were necessary.

In the case of lacosamide, Kohn applied for the US priority filing in 1996 and then, before the international application was filed, executed an assignment of the invention to RCT. The issue was: what had he assigned to RCT?

The case heard evidence from eminent judges on Texan and US federal law. Ultimately, it boiled down to matters of fact, and how those were to be interpreted.

The professor’s obligation to assign all inventions meant that the university was entitled to the equitable and beneficial interest in lacosamide. What Kohn held was simply the bare legal interest. This is what he assigned to RCT.

That was not sufficient for the purposes of claiming priority, since that could only be claimed by the holder of the equitable or beneficial interest. The result was that without any other legal reason, the earlier US priority date would not stand, and so the Choi thesis would invalidate the patent.

Good faith

Although the judge appeared unhappy with this outcome, there was a possible saving argument, known as the ‘bona fide purchaser’ argument. This is a common law concept, which in the US has been codified in statute.

Notwithstanding that the University of Houston was entitled to the equitable and beneficial interest, if a bona fide purchaser without notice of the university’s interest entered into an assignment with the assignor (Kohn), then that bona fide purchaser achieves full title. The University of Houston’s only remedy would be damages against the professor.

On the facts, the judge concluded RCT did not have notice of the university’s equitable title. Therefore, the assignment from Kohn to RCT was for both legal and equitable title, and so RCT were able to claim priority. Accordingly, the Choi thesis did not invalidate the patent.

Accord’s other attacks on the patent’s validity also failed, and so the supplementary protection certificate stood.

“When something as successful as lacosamide comes under the microscope, no stone will be left unturned by those wishing to invalidate the patent”

This was a close call. The absence of any correspondence, or even witness recollection, about the proper workings of the relationship between the University of Houston and RCT, lost RCT the first ground, but worked the other way in terms of the bona fide purchaser without notice.

Meanwhile, the collaborative way that the professor, the university and RCT all dealt with each other and kept each other informed played into the judge’s hands.

On one hand, the judge could claim the university had not made any offer or received any acceptance because there was nothing written or otherwise, and so it had not followed any procedure. That enabled him to claim that the assignment from the professor to RCT was what the company would have expected to receive, and so not have noticed the University of Houston’s interest.

It therefore ‘trumped’ the title the university had. Had the judge not dealt with it this way, even if the University of Houston had subsequently assigned their equitable or beneficial title to RCT after the filing of the international application, and so ‘perfected’ the title, this would still be too late because the wrong party was claiming priority at the relevant time.

Risky business

Perhaps even more so in the UK than the US, the arrangements between university professors, their academic institutions and industry is somewhat ‘loose’. In most cases, this will never matter and whatever inventions or patents that emanate from the professor or university will never be litigated.

However, when something as successful as the lacosamide patent comes under the microscope, then no stone will be left unturned by those wishing to invalidate the patent.

If the priority date can be attacked it is invariably the case that there is better prior art – public disclosures relevant to the patent – between the initial filing and the later international filing, which invalidates the patent.

As with lacosamide, the sums at stake may make it well worthwhile litigating the point. As can be seen in this instance, it nearly worked.

The message from this case is undoubtedly that industry should look more closely and carefully at the project they have in place with universities and their professors, and particularly the procedures in place relating to assignments. In that way, entitlement to priority arising out of who has claimed it should never be in doubt.

Paul Harris is a partner at Venner Shipley

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