Finally, in their tenth cause of action, plaintiffs allege that defendants Salutar and NIAS have tortiously interfered with their contracts with the University.
Plaintiffs and the University have filed cross-motions for summary judgment; plaintiffs seek summary adjudication of their breach of contract claim, and the University seeks summary judgment on all of plaintiffs' causes of action except the claim seeking a declaratory judgment removing Scott Rocklage as the inventor of the '744 patent.
The Court has requested and received supplemental briefing, and the matter has been extensively briefed and argued.
For the reasons set forth below, the Court will deny plaintiffs' motion for summary judgment and grant the University's motion. However, the Court will certify this case for interlocutory review.
Plaintiff Moseley was hired by the University in 1982 as an Associate Professor of Radiology at UCSF. Upon being hired, Moseley executed a form Patent Agreement that required him to assign all rights in any invention developed during his employment to the University. Plaintiff Kucharczyk joined the UCSF faculty in 1988 and was a tenured member of the UCSF Department of Radiology. Prior to his employment, Kucharczyk also signed a form Patent Agreement in which he agreed to assign all invention rights to the University.
The '744 Patent grew out of plaintiffs' work at the UCSF Department of Radiology in the late 1980s. Plaintiffs' research was initially funded by Syntex to assess therapeutic drugs used for stroke treatment. However, Syntex ended its funding, and Salutar began funding plaintiffs' research. Plaintiffs claim that on February 13, 1989, they conceived of the use of DyDTPA-BMA, a chemical compound invented by Salutar, as a contrasting agent useful in detecting strokes via MRI. On February 23, 1990, plaintiffs faxed a disclosure form to the University's Patent Office discussing the invention and identifying the funding source or sponsor for the project as "Salutar, Inc." On March 9, 1990, Salutar and the University filed a patent application for the process. That application named as inventors Rocklage and both plaintiffs. In April of 1990, the University and Salutar submitted a grant application to California Department of Commerce for a CompTech grant under which Salutar sought to contribute $ 150,000 toward the research, and Salutar and the University asked the state to match that amount with a $ 150,000 grant. The University and Salutar executed an agreement entitled Memo of Understanding Under California Competitive Technology Program Grant Application (the "Research Funding Agreement"). The Research Funding Agreement designated Kucharczyk as the Principal Investigator for the University and Moseley as co-investigator. Kucharczyk signed the Research Funding Agreement. In 1990, CompTech provided $ 150,000 in research funds to UCSF.
Plaintiffs assigned their rights in the invention to the University in the Assignment Agreement they signed in early 1990.
Rocklage assigned his rights to Salutar, which in turn assigned its rights to the University on May 7, 1990. On June 13, 1990, Salutar and the University entered into their exclusive License Agreement ("License Agreement"). In accordance with the License, Salutar paid the University $ 12,500 upon executing the license and paid an additional $ 12,500 patent issued in March of 1993. The University paid plaintiffs 50% of each of those payments.
III. SUMMARY JUDGMENT
Both parties have moved for summary judgment. Summary judgment is appropriate where no genuine issue exists as to any material fact and where the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The moving party has the burden of establishing that there is no genuine issue of material fact. Id. ; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Generally, after the moving party makes a properly supported motion, the non-moving party has the burden of presenting specific facts showing that contradiction is possible. British Airways Board v. Boeing Co., 585 F.2d 946, 950-52 (9th Cir. 1978). It is not enough for the non-moving party to point to the mere allegations or denials contained in the pleadings. Instead, it must set forth, by affidavit or other admissible evidence, specific facts demonstrating the existence of an actual issue for trial. The evidence must be more than a mere "scintilla" of evidence; the non-moving party must show that the trier of fact could reasonably find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Summary judgment may be granted "if the evidence is merely colorable . . . or is not significantly probative." Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1288 (9th Cir. 1987). In reviewing a motion for summary judgment, the Court must take the non-movant's evidence as true and all inferences are to be drawn in the light most favorable to the non-movant. Id. at 1289.
At issue in this case are several contracts: (1) the Patent Agreement between each of the plaintiffs and the University; (2) the Assignment Agreement between the plaintiffs and the University; (3) the CompTech Research Funding Agreement between the University and Salutar; and (4) the Licensing Agreement between the University and Salutar. Plaintiffs contend that the University was obligated by contract to obtain a reasonable running royalty upon licensing their invention. The Court's first task in this case is thus an analysis of the nature and content of the various contracts at issue here to determine whether they contain such an obligation as well as an analysis of the requirements of the Patent Policy, which plaintiffs argue obligates the University to obtain a reasonable royalty.
The Court first discusses the Patent Agreement and the Assignment Agreement. Though neither expressly requires the University to obtain a royalty, both of these documents refer to the University's Patent Policy. Plaintiffs contend that the Patent Policy applies to them as a matter of contract because it is incorporated by reference into the Patent and Assignment Agreements. They also contend that the Patent Policy requires a mandatory royalty. The Court agrees that the Patent Policy applies here, but for the reasons set forth in detail below, the Court finds that the Policy does not contain such an obligation. The Court also finds that neither the Research Funding Agreement nor the License Agreement contains a contract term requiring the University to obtain a royalty on the plaintiffs' invention.
A. Patent Agreement
Upon joining the University faculty, each plaintiff executed a form Patent Agreement with the University requiring them to assign to the University all rights in any invention developed in the course of their employment. Plaintiff Moseley signed a 1980 version of the Patent Agreement on October 21, 1982. Plaintiff Kucharczyk signed a 1985 version Patent Agreement on December 30, 1987. The Patent Agreements are very similar, and the parties agree that the 1985 version of the Patent Agreement is applicable here.
For that reason, only the 1985 version will be described here.
The Patent Agreement is contained on a form contract bearing the title "University of California State Oath of Allegiance and Patent Agreement." The first page contains the State Oath of Allegiance and what will be referred to as the Patent Policy Statement. The Patent Policy Statement, which will be discussed in greater detail in Section IV.C.2, infra, bears the heading "University of California Patent Policy." The first page of agreement bears a notation on the bottom indicating "POLICY IS CONTINUED... Please sign Patent Agreement on reverse side." The Patent Policy Statement continues on the reverse side. The end of the Patent Policy Statement states that it was revised effective November 18, 1985. The reverse side also contains the Patent Agreement. The Patent Agreement states "Please read Patent Policy on reverse side and above."
The Patent Agreement states: "by execution of this agreement, I understand that I am not waiving any rights to a percentage of royalty payments received by University, as set forth in University Patent Policy." It further states that it is made "in part consideration of my employment, and of wages and/or salary to be paid to me during any period of employment, by University, and/or my utilization of University research facilities and/or my receipt of gift, grant or contract research funds through the University." The Patent Agreement further requires each plaintiff to do all things necessary to assign the rights to the University. No express term in the Patent Policy requires the University to obtain a royalty.
B. Assignment Agreement
The Assignment Agreement too makes reference to the Patent Policy. Following their invention, Kucharczyk and Moseley entered into an Assignment Agreement with the University whereby plaintiffs assigned all their rights in their process to the University. The Assignment Agreement recited that the assignment was made:
in consideration of One Dollar ($ 1.00) and in consideration of the benefits stipulated in the "University of California Policy Regarding Patents", as revised and effective as of November 18, 1985, which document is made by reference part hereof, and in fulfillment of my Patent Agreement with the University of California.
The assignment Agreement itself does not contain any term requiring the University to obtain a royalty on an invention.
C. Patent Policy
1. Contract Term
The Court now turns to a discussion of the Patent Policy, which plaintiffs argue applies to them and requires the University to obtain a royalty on their invention. The Patent Policy itself is not an agreement between the parties. Instead, as a policy of the University, it has the force and effect of statute. Regents of University of California v. City of Santa Monica, 77 Cal. App. 3d 130, 135, 143 Cal. Rptr. 276 (1978).
However, plaintiffs contend that the Patent Agreement and the Assignment Agreement incorporate by reference the Patent Policy and that the Patent Policy thereby became a term of these agreements
"For the terms of another document to be incorporated into the document executed by the parties the reference must be clear and unequivocal, the reference must be called to the attention of the other party and he must consent thereto, and the terms of the incorporated document must be known or easily available to the contracting parties." Williams Const. Co. v. Standard-Pacific Corp., 254 Cal. App. 2d 442, 61 Cal. Rptr. 912 (1967). While the Patent Agreement does not expressly state that it is incorporating the Patent Policy by reference, it clearly and unequivocally refers to it, stating that execution of the agreement does not waive the signer's "rights to a percentage of royalty payments received by University, as set forth in University Patent Policy, hereinafter called 'Policy'" and making several other references to the Policy. The reference is called to the attention of both parties. Finally, the Patent Policy is easily available to the contracting parties given that it is printed on the reverse side of the Patent Agreement. The Court finds that the Patent Policy is thus incorporated by reference into the Patent Agreement. See, Singer v. The Regents of the University of California, No. 950381 (San Francisco Super. Ct. Mar. 1, 1996), slip op. at 8 (holding Patent Policy incorporated by reference into Patent Agreement). The Patent Policy is likewise expressly incorporated by reference in the Assignment Agreement, which states that the assignment is made "in consideration of the benefits stipulated in the 'University of California Policy Regarding Patents', as revised and effective as of November 18, 1985, which document is made by reference part hereof." The Patent Policy thus is both an official policy of the University, with the force and effect of statute, Regents v. Santa Monica, 77 Cal. App. 3d at 135, and a contract term.
Having concluded that the Patent Policy was incorporated by reference into both the Patent Agreement and the Assignment Agreement, the Court now turns to an analysis of the Patent Policy, a subject of no small dispute. In brief, plaintiffs contend that the Patent Policy contains a requirement that all licenses bear reasonable royalties; the University contends that it does not. Both parties point to different documents in support of their positions. For the reasons set forth below, the Court finds that the Patent Policy does not require all licenses to be royalty-bearing.
2. Patent Policy Statement
The University contends that the Patent Policy consists solely of the Patent Policy Statement, i.e., the words reproduced on the 1985 Patent Agreement in the section titled: "University of California Patent Policy." The Patent Policy Statement consists of three parts: (I) Preamble, (II) Statement of Policy, and (III) Patent Responsibilities and Administration. The Preamble states the purpose of the Patent Policy:
It is the intent of the President of the University of California, in administering intellectual property rights for the public benefit, to encourage and assist members of the faculty, staff, and others associated with the University in the use of the patent system in a manner that is equitable to all parties involved.
The Preamble further states that the Patent Policy was adopted:
To encourage the practical application of University research for the broad public benefit, to appraise and determine relative rights and equities of all parties concerned, to facilitate patent applications, licensing, equitable distribution of royalties, if any, to assist in obtaining funds for research, to provide for the use of invention-related income for the further support of research and education, and to provide a uniform procedure in patent matters when the University has a right or equity . . .