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REGENTS OF THE UNIV. v. ELI LILLY & CO.

April 16, 1991

THE REGENTS OF THE UNIVERSITY, OF CALIFORNIA, Plaintiff,
v.
ELI LILLY & CO., Defendants


D. Lowell Jensen, United States District Judge.


The opinion of the court was delivered by: JENSEN

ORDER

I. Introduction

 On April 10, 1991, this Court heard oral argument on the following motions: plaintiff's motion for leave to amend the complaint; defendant's motion to amend the original answer, add affirmative defenses and counterclaims, and for an extension of time for discovery; defendant's motion to compel joinder of a necessary party; and lastly, plaintiff's motion for appointment of a special master.

 Thomas D. Nevins, Robert C. Miller, and Allen B. Wagner appeared for plaintiff. Robert A. Weikert, Charles E. Lipsey, Susan H. Griffin appeared for defendant.

 This order addresses only the defendant's motion to add an interference counterclaim, defendant's motion for joinder of a necessary party and plaintiff's motion for appointment of a special master. At the hearing the Court granted plaintiff's motion to amend the complaint and asked the parties to submit discovery schedules. Furthermore, a status conference was set for July 17 at 9 a.m. For the following reasons, defendant's motion to add an interference counterclaim under 35 U.S.C. 291 is DENIED; defendant's motion to compel joinder of a necessary party is DENIED; and plaintiff's motion for appointment of special master is DENIED.

 II. Background

 In the original complaint filed by the Regents of the University of California ("U.C.") on February 7, 1990, U.C. claimed that defendant, Eli Lilly and Company ("Eli Lilly") infringed, inter alia, U.C.'s U.S. Patent No. 4,431,740 (" the 740 patent"). The 740 patent is directed to the production of human insulin, the hormone used to treat diabetes, by recombinant DNA technology. Plaintiff contends that this invention was developed by researchers at the University of California at San Francisco.

 Eli Lilly manufactures insulin, through recombinant DNA methods using a gene which encodes proinsulin. The proinsulin gene presently utilized by Eli Lilly in its process was obtained from Genentech, Inc. ("Genentech") pursuant to an agreement between Eli Lilly and Genentech relating to the production of insulin. See Defendant's Memorandum in Support of Motion for Joinder, Exhibit A (hereinafter, Defendant's Motion for Joinder). Eli Lilly contends that it is the use of this proinsulin gene which U.C. alleges infringes the 740 patent. See Defendant's Motion for Joinder at 5. U.C. contends that the alleged acts of infringement are Eli Lilly's "manufacture and sale in the United States of its recombinant DNA origin human insulin products." See Plaintiff's Memorandum in Support of Motion to Amend the Complaint at 2 (hereinafter, Plaintiff's Motion to Amend).

 In Eli Lilly's countermotion it contends that under an agreement between it and Genentech, Genentech assigned to it an exclusive license in claim 6 of U.S. Patent No. 4,704,362 ("the 362 patent," also referred to as the "Riggs-Itakura" patent) owned by Genetech. Eli Lilly, therefore, contends that it is the exclusive licensee of the subject matter claimed in claim 6 of that patent. The agreement entered into on August 25, 1978, provides in part:

 Genentech hereby grants to Lilly the exclusive, irrevocable world-wide rights with the right to grant sublicenses, to use all Genentech Recombinant Microorganisms for the limited purpose of manufacturing, selling and using Recombinant Insulin without regard to Genentech Patent Rights, and in connection only with such production, sale and use, to use all technical information and know-who supplied by Genentech hereunder. Rights granted hereunder shall include the right to practice under any applicable Genentech Patent Rights.

 See Defendant's Motion for Joinder, Exhibit A at pp. 18-19, para. 6.01. This agreement does not expressly state that Genentech assigned, in whole or in part, any patent rights owned by it. Eli Lilly, however, contends that the agreement encompassed the subject matter covered in claim 6 of Genentech's 362 patent and, therefore, it is the exclusive licensee of such rights. See Defendant's Memorandum in Response to Plaintiff's Motion to Amend and to Amend Answer and Counterclaims and for Enlargement of Time for Discovery at 7 (hereinafter, Defendant's Counterclaims). Elsewhere in the briefs, Eli Lilly contends that it is the beneficial owner of claim 6 of the 362 patent. See Defendant's Motion for Joinder at 9. In light of these facts, defendant asserts it may allege a counterclaim of intervention under 35 U.S.C. section 291. Also, defendant contends that if it is not allowed to assert the interference counterclaim in its own name, it should be allowed to join Genentech as a necessary party to the interference counterclaim.

 Further, defendant asserts that during discovery in a collateral suit against Genentech *fn1" it discovered a document pertaining to an agreement entered into by Genentech and U.C. which suggested the existence of possible defenses to the alleged infringement of the 740 patent. According to defendant, Genentech and U.C. purportedly entered into an agreement which settled a dispute which arose over an improper transfer to Genentech of chemical and biological materials by two U.C. post-doctoral fellows, Dr. Peter Seeburg and Dr. Axel Ullrich. Defendant believes that certain of these transferred materials were used to produce or are included in the proinsulin gene supplied to it by Genentech. See Defendant's Countermotion at 5. According to defendant, the agreement, attached to defendant's countermotion as tab c, releases Genentech from all claims U.C. otherwise had against Genentech from the use of the materials transferred. Defendant believes that Genentech agreed to pay U.C. a portion of the monies received from defendant pursuant to the Genentech/Lilly agreement in return for the release. Id. at 6. In light of this alleged agreement, defendant asserts that its use of the proinsulin gene has been, in essence, authorized by U.C. and, therefore, U.C. has no right of action for infringement of the 740 patent against Eli Lilly. Under the facts as alleged, defendant seeks to amend the answer to assert the affirmative defenses of estoppel, waiver, release, license, laches and payment. Additionally, defendant seeks to file a counterclaim for declaratory judgement based on the alleged agreement between Genentech and U.C.

 III. Discussion

 A. Because the defendant lacks standing to assert an interference counterclaim under section 291. its ...


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