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In one of the latest trends in intellectual property litigation, universities across the United States are suing corporations over patent and licensing rights. And this is no academic debate. The universities are seeking royalties up into the hundreds of millions of dollars. Many of the nation’s largest and most prestigious universities have become involved in this litigation, either as primary plaintiffs or as co-claimants in patent actions brought by exclusive licensees. In current patent infringement actions, for example, the University of Rochester has sued Pfizer Inc. over the patent for the building blocks of the anti-inflammatory drug Celebrex; Cornell University has sued Hewlett-Packard Corp. over a technique for accelerating the processing speed of computers; and the University of Illinois has sued Fujitsu Ltd. over technology relating to flat panel displays. In actions where the licensee is taking the lead, Eolas Technologies and the University of California are suing Microsoft Corp. charging violation of a Web browser patent; the Massachusetts Institute of Technology and Electronics for Imaging Inc. are suing more than 100 corporations, charging infringement of a patent for color-image editing software; and MIT, Harvard and ARIAD Pharmaceuticals Inc. are suing Eli Lilly and Co., claiming infringement by two Lilly products, including a medication for the prevention of osteoporosis. “Increasingly universities are looking to their patent portfolios as a way to enhance revenue streams and recoup investments,” says Edward G. Poplawski of the Los Angeles office of Sidley Austin Brown & Wood, who is representing Cornell in the Hewlett-Packard case. Cornell University v. Hewlett-Packard Co., No.01-CV-1974 (N.D. N.Y.). “Universities are realizing that intellectual property can be a profit center,” adds Russell B. Hill of Howrey Simon Arnold & White’s Irvine, Calif., office, who represents MIT in the color-image software litigation. The litigation is particularly intense in the pharmaceutical and biotech industries, says Leora Ben-Ami of New York’s Clifford Chance Rogers & Wells, who is representing ARIAD in the Lilly lawsuit. “A lot of the fundamental research in biotech and pharmaceuticals is coming out of the universities, but the pharmaceutical industry doesn’t want to pay unless prodded,” she says. The possible payoffs for the universities can be staggering, says Gerald Dodson of the Palo Alto, Calif., office of Morrison & Foerster, who represented the University of California in a patent infringement action against Genentech over recombinant human growth hormone. That suit ended in 1999 in a $200 million settlement from Genentech. That recovery is small potatoes compared to the damage claim in the University of Rochester lawsuit over patent rights to the medication Celebrex. “Celebrex has had $300 billion in sales and the University of Rochester is entitled to up to 25 percent of this,” says Dodson, who represents the university. The lawsuit, he adds, “is arguably the largest patent case in the United States.” A major factor driving this university vs. corporation litigation was the passage in 1986 by the U.S. Congress of the Bayh-Dole Act, which enabled universities and other nonprofit institutions to own technology based on research that had been government-funded. The law also allowed these institutions exclusively to license the technology. Prior to Bayh-Dole, universities could not take out patents on technology developed with government funding, notes Karin Rivard, counsel in the technology licensing office of MIT. The passage of Bayh-Dole, Rivard says, set off a process at major universities of discerning and identifying any patentable inventions. Universities began filing patent applications and the patents “slowly began to issue,” she says. “But these were embryonic technologies. It took years of development to bring these products to market.” There are no figures on the number of patent infringement actions filed by these institutions, according to the Association of University Technology Managers, but the organization has tracked a continuous growth in patents applied for and issued and licenses granted by university technology offices. ACTIVE LICENSING “People are much more active in licensing technology since Bayh-Dole,” says Elizabeth L.R. Donley, general counsel of the Wisconsin Alumni Research Foundation, the patent agency of the University of Wisconsin at Madison. At Wisconsin, she says, there are currently 325 “disclosures,” or claims by researchers on campus saying that they had developed inventions using government funds and were seeking to have patents and licenses on these inventions. The University of Rochester patent action is typical of the delay between basic research and ultimate product development and litigation. The university contends that its researchers Donald Young, Michael Kerry O’Banion and Virginia Winn worked for more than 10 years in developing the method to create the Cox-2 inhibitors that form the anti-arthritis drugs Celebrex and Vioxx. The Rochester team discovered a gene that produces the human Cox-2 enzyme and determined that blocking the activity of the enzyme would eliminate the worst side effects of nonsteroidal anti-inflammatory drugs. This led, says Dodson, to “a new generation of superaspirin. It gives the benefits of aspirin without the side effects of gastrointestinal toxicity and stomach ulcers.” The Rochester team applied for the first patent on this technology in Sept. 1992, but the patent was not issued until April 2000. Pfizer Inc. and G.D Searle & Co. had introduced their Cox-2 inhibitor drug Celebrex the previous year and it quickly became the fastest-selling drug in history, according to the university. The day the patent was issued to the University of Rochester, the school sued Pfizer and Searle, charging infringement. The lawsuit is in the discovery stages, Dodson says. University of Rochester v. G.D. Searle & Co. Inc., No. 00-CV-0161L (B) (W.D. N.Y.). Defense attorneys did not return calls for comment, but the companies dispute the Rochester claims. According to court filings, the defense contends the patent is invalid because it failed to meet the written description requirement of federal law governing patents. The law mandates that the written description in the patent application “must convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention.” The defense asserts that the patent is invalid because this description is too different from the actual product. In the Rochester case, the university is the primary plaintiff. But in many of the cases, the licensee takes the lead in the litigation. MIT, for instance, is a listed plaintiff in a lawsuit filed in Texas against Microsoft Corp. and more than 200 other companies over a MIT patent covering image editing software. But the exclusive licensee, Electronics for Imaging Inc., is the lead plaintiff. The license gave EFI “the right to enforce the patent,” Hill notes. In most agreements for exclusive licenses, says MIT’s Rivard, “the licensee indemnifies and covers defense costs.” But, she adds, “Only the exclusive licensees have the right to bring and control a lawsuit.” If the technology has been licensed to several entities, the university handles the lawsuit. Otherwise, she says, “one nonexclusive licensee could put the validity of the patent at risk.” Many of the lawsuits are not seeking damages for patent infringement, but are license or contract disputes, Donley notes. WARF, for instance, is currently suing one exclusive licensee of technology developed by the university because the defendant has failed to show an active development of products. “They’re just squatting on the rights.” And not all the lawsuits are seeking to enforce patents held by the institutions. In a lawsuit by the University of Colorado, for example, university professors Robert H. Allen and Paul A. Seligman had never applied for a patent on their reformulation of Materna, a prenatal vitamin sold by American Cyanamid. The professors were claiming instead that American Cyanamid had copied their work and used it to acquire a patent, says plaintiffs’ attorney Robert N. Miller of the Denver office of New York’s LeBoeuf, Lamb, Greene & MacRae. The university, along with Allen and Seligman, sued American Cyanamid, charging copyright infringement, patent infringement and common law fraud. In 1997, U.S. District Judge John Kane of the District of Colorado awarded $45 million to the plaintiffs. This was set aside by the U.S. Court of Appeals for the Federal Circuit on appeal, which found the damages were based on the wrong predicate. In the second trial, Judge Kane ordered American Cyanamid to pay the university and the researchers $57 million. American Cyanamid’s successor corporation, Wyeth, will appeal, says corporate spokesperson Lowell Weiner. “The court ignored and misapplied basic principles of patent law.” Judge Kane’s decision, he says, “clears the way for us to appeal to the Federal Circuit again.” University of Colorado Foundation v. American Cyanamid Co., No. 93-K-1657. Despite the possible recoveries, says Poplawski, schools “are certainly not actively searching for litigation. It’s a last resort. They’d rather have cordial relationships with these businesses.” The costs of litigation can be prohibitive, adds Martin Simpson, university counsel for the University of California. A lawsuit could cost $1 million before trial and another $1 million at trial, he estimates. “If the prospective royalties aren’t large enough, we won’t file,” he says. Winning is hardly a sure thing, adds Poplawski. “Courts have been cutting back on the scope of patent protection.” The lawsuits by the universities, he says, “are going against the grain.” Until the early 1990s, Poplawski says, “the Federal Circuit had an expansive view of patent protection. But in the 1990s, the Federal Circuit became concerned about these isolated large jury awards.” A series of decisions narrowed the scope of patent protection, starting with the Markman decision, which left claims construction for the court, instead of the jury. “This narrowing of the scope reached the high water mark with Festo,” he adds, referring to the en banc Federal Circuit decision wiping out the doctrine of equivalents in patent infringement litigation.

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