United States District Court, Northern District of California
May 6, 1999
JOHN KUCHARCZYK, AN INDIVIDUAL, AND MICHAEL MOSELEY, AN INDIVIDUAL, PLAINTIFFS,
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, NYCOMED SALUTAR, A CALIFORNIA CORPORATION; AND NYCOMED IMAGING AS, A NORWEGIAN BUSINESS ENTITY, DEFENDANTS.
The opinion of the court was delivered by: Breyer, District Judge.
MEMORANDUM AND ORDER
Plaintiffs John Kucharczyk and Michael Moseley have filed suit against
UC Regents and the Nycomed defendants (Nycomed Salutar and Nycomed
Imaging A.S., collectively "Nycomed"), alleging that they acted to
improperly deprive plaintiffs of their rightful share of the financial
rewards of a patented medical technique they developed. A number of
summary judgment motions are presently before the Court.
A. The Patent
The dispute arises out of the invention of a particular kind of
magnetic resonance imaging technique ("MRI"). MRI is a process whereby
physicians obtain an image of an internal part of the body in a way that
allows them to discover a contrast between healthy and diseased tissues.
This contrast is enhanced through the use of "contrast agents" that are
injected into the patients undergoing MRI.
One particular type of magnetic resonance imaging is "perfusion MRI,"
which is a technique for detecting and determining the extent of blood
flow in body tissues, and thereby detecting the presence of any blood
flow abnormalities. Plaintiffs invented a particular method for
conducting perfusion MRI, which was ultimately patented as U.S. Patent
No. 5,190,774. The abstract for that patent describes the invention as
The invention provides a method of detecting blood
flow abnormality or variation in a human or
non-human body, said method comprising
administering into the cardiovascular system of
said body a contrast enhancing amount of
intravascular paramagnetic metal containing
magnetic resonance imaging contrast agent, subject
said body to a magnetic resonance imaging
procedure capable of generating from magnetic
resonance signals from said body a series of
temporally spaced images of at least part of said
body into which said agent passes and detecting
temporal variation in said signals or images
whereby to identify regions of abnormal or
modified blood flow in said body and to indicate
the degree of blood flow abnormality or
`744 Patent. An important key to this method is the existence of a
"paramagnetic metal containing magnetic resonance imaging contrast agent"
(italicized portion above), which is to be injected into the body for the
performance of the MRI.
B. Conception and Development of the Invention
Plaintiffs conceived of this method for perfusion MRI during the late
1980s*fn1 while they were employed with the University of California at
San Francisco as professors of radiology. During the course of their
employment, their research was being funded, at least in part, by the
Nycomed defendants. Plaintiffs claim that they discovered a way to use
contrast agents to conduct a particular kind of perfusion MRI. This is
the method that was ultimately claimed in the `744 patent.
The italicized portion of the language quoted above references the type
of contrast agent that was used with the method—a "paramagnetic
metal containing magnetic resonance imaging contrast agent." Nycomed had
invented a contrast agent of this type, entitled S-043. Nycomed's
interest in plaintiffs' research stemmed from its desire to develop an
MRI technique which would incorporate the use of S-043.
On February 23, 1990, Dr. Kucharczyk faxed a disclosure form to the
University's Patent Office describing the invention and identifying
Nycomed as the funding source. This disclosure form indicated that Dr.
Scott Rocklage of Nycomed was a co-inventor of the method, and the
subsequent application to the U.S. Patent Office indicated this as well.
Shortly thereafter, pursuant to the terms of their employment with UCSF,
plaintiffs entered into an assignment agreement which transferred all
their rights in the invention to the University.
In June 1990, the University entered into a license agreement with
defendant Nycomed,*fn2 whereby Nycomed agreed to pay the University a
total of $25,000 for the exclusive right to the `744 patent. Pursuant to
the assignment agreement and patent agreement signed by the plaintiffs,
as well as the University's patent policy,*fn3 the University paid half
of this money to the plaintiffs.
C. The Dispute
Plalntiffs claim that the method which they have invented is worth
substantially more than $25,000. They allege that the University failed
to conduct a proper investigation into the nature and origin of the
invention before entering into negotiations with Nycomed, thereby leading
to a licensing agreement that was grossly one-sided. This, plaintiffs
argue, constituted a breach of the University's contractual obligations
to Dr. Kucharczyk and Dr. Moseley. Plaintiffs further argue that Nycomed
committed numerous fraudulent misrepresentations to the University and to
the inventors during the course of these negotiations, again leading to
the completion of a grossly one-sided licensing agreement in Nycomed's
Plaintiffs assert, for example, that Nycomed falsely misrepresented
that Dr. Rocklage was a co-inventor of the method, thereby causing the
University to believe that Nycomed (to whom Rocklage had assigned his
rights in the patent) already possessed an undivided right in the
method. They argue that Rocklage was not truly a co-inventor, meaning
that Nycomed did not already possess a right to use the method, which in
turn meant that the licensing agreement was much more valuable to Nycomed
and it would have paid more to the University.
Plaintiffs also argue that Nycomed grossly underrepresented the value
of the contemplated licensing agreement, knowing that the company
actually stood to make millions of dollars from it. Again, these
fraudulent misrepresentations allegedly caused the University to enter
into a lopsided agreement with Nycomed. Further, plaintiffs argue that
minimal investigation by the University would have revealed the fraud and
would have caused the University to obtain more valuable consideration
for itself and for plaintiffs in exchange for the license. Indeed,
plaintiffs argue that the University could have successfully obtained a
substantial running royalty for the sale of Nycomed's contrast agent,
D. Procedural History
This lawsuit was filed more than five years ago and is presently on its
third district judge. First, on September 11, 1996, Judge Eugene Lynch
issued a published decision granting summary judgment for the University
on most of the claims against it. Kucharczyk v. Regents of the University
of California, 946 F. Supp. 1419 (N.D.Ca. 1996). He ruled, inter alia,
that the plaintiffs could not properly rescind the agreement by which
they had assigned their rights in the patent to the University, nor could
they bring actions against the University that sounded in tort. As to
plaintiffs' breach of contract claim, Judge Lynch issued a partial
ruling, as explained below.
In order to reach his partial ruling on plaintiffs' breach of contract
claim, Judge Lynch was required to conduct some assessment of the
University's contractual obligations to the plaintiffs. In this respect,
he ruled that, as a general matter, the University had no contractual
obligation to obtain a running royalty in exchange for the grant of an
exclusive license to a patented invention. Id. at 1432. This, at the
time, was plaintiffs' primary legal argument.
Thus, because the University had no per se contractual obligation to
its employees to obtain a running royalty in exchange for a license to
use its inventions, and because the University is a public entity, Judge
Lynch reviewed plaintiffs' claim for a running royalty using the
"arbitrary and capricious" standard rather than the "breach of contract"
standard, relying only on the "closed record" of information that was
available to the University at the time. He suggested that because
plaintiffs had no contractual right to a running royalty, they were in
essence making a challenge to the licensing agreement between the
University and Nycomed. This agreement, Lynch suggested, was
quasi-legislative in nature and thus required review under the arbitrary
and capricious standard.
Applying this standard, Judge Lynch first rejected plaintiffs' claim
that the University was arbitrary and capricious in entering into the
license agreement without investigating whether Scott Rocklage was truly
a co-inventor of the method. He cited the fact that plaintiffs themselves
informed the University, in the disclosure form that Dr. Kucharczyk sent
to the University's patent office, that Rocklage was a do-inventor. Id.
at 1440. Furthermore, the Judge found that "though plaintiffs were well
aware that the University was treating Rocklage as an inventor, and
plaintiffs were familiar with their invention and its genesis, they never
challenged that treatment." Id. at 1442.
Judge Lynch further held that the University's decision to enter into
the licensing agreement for $25,000 up front, without royalty payments,
was not arbitrary and capricious based on the facts disclosed in the
administrative record. For example, the disclosure form that Dr.
Kucharczyk faxed to the University patent office indicated that Nycomed
was the only funding source for the invention. See id. at 1439. The Judge
also found that "[f]rom the beginning [Nycomed] was unwilling to pay a
royalty because they owned the patent to the compound used in the
plaintiffs method," and that Nycomed was only willing to pay a small
amount for the license. Id. at 1439, 1443. He further emphasized that the
University's negotiating position was colored by the fact that both the
Regents and plaintiff Kucharczyk himself wanted to maintain a research
funding relationship with Nycomed. Id. at 1443.
Despite this ruling, Judge Lynch left "for another day" the question
whether the University had violated some other contractual duty to
plaintiffs. For example, although he found that the University was not
arbitrary and capricious in not conducting further investigation on the
question whether Dr. Rocklage truly was a coinventor, he explicitly
reserved the question whether the University had a contractial duty to
the plaintiffs to conduct an inventorship audit. See id. at 1432, fn.
10. He also reserved the question whether the University had a
contractual duty to properly inform itself regarding the nature and value
of the invention before negotiating a license agreement with Nycomed. See
Next, in November 1997, the University brought a summary judgment
motion before Judge Maxine Chesney on plaintiffs' remaining claims
against it.*fn4 These claims included the question whether Dr. Rocklage
was a true coinventor of the method and the question whether the
University had breached some contractual obligation to the plaintiffs in
conjunction with its granting of the license to Nycomed. Judge Chesney
denied summary judgment on the question of who invented the patent, on
the grounds that a triable issue of fact existed "with respect to the
equitable defenses of estoppel and laches, and defendant has failed to
make a prima facie showing as to assignor estoppel." She also denied the
University's summary judgment motion on plaintiffs' breach of contract
claims. Judge Chesney emphasized the fact that only limited discovery had
taken place up to that point, suggesting that plaintiffs had not yet been
given a fair opportunity to present facts that would warrant a denial of
In December 1998, Nycomed moved for summary judgment in this Court on
all claims against it. In addition, Nycomed moved to dismiss the
complaint on the grounds that even if Nycomed was liable in contract or
in tort, plaintiffs had suffered no damages because the `744 patent was
worthless. The Court rejected this latter claim, ruling that if
plaintiffs are able to establish that Nycomed fraudulently caused them to
receive a lesser payment in connection with the licensing agreement, they
will, by definition, show that they were damaged. The Court then denied
Nycomed's summary judgment motion on the grounds that plaintiffs had not
yet been granted adequate discovery. The Court then lifted the stay on
discovery and informed Nycomed that it could renew its summary judgment
motion at the close of discovery.
F. Motions Currently Before the Court
Discovery having been largely completed, the parties have filed or
renewed various motions:
1. Breach of contract claim
First, plaintiffs seek summary judgment on their third claim for
relief, which alleges breach of contract by the University for, inter
alia, failure to determine the nature of the invention, failure to
determine the true inventors, failure to determine the true sponsors of
the inventors' research, and failure to determine the value of the patent
before granting a license to Nycomed. The University has filed a
cross-motion for summary judgment on this issue, arguing that: 1) no such
contractual obligations exist, and 2) to the extent that they may exist,
they were not breached in the present case.
2. Claims against Nycomed
Second, Nycomed seeks summary judgment on all claims against it.
Plaintiffs' second amended complaint asserts the following causes of
action against Nycomed:
* Declaration of Sole Inventorship (First Claim
for Relief): plaintiffs first ask the Court to
declare that they are the sole inventors of the
method claimed in the `744 patent, arguing that
the inclusion of Nycomed employee Scott Rocklage
as a co-inventor was erroneous. Plaintiffs bring
this claim under 35 U.S.C. § 256.
* Breach of Contract (Fourth Claim for Relief):
plaintiffs allege that Nycomed breached its
research funding agreement*fn5 with the
University, and assert that as thirdparty
beneficiaries to that contract, they may recover
for the breach.
* Inducing Breach of Contract (Fifth Claim for
Relief): plaintiffs further allege that Nycomed
engaged in fraudulent conduct which caused the
University to breach its contract with
plaintiffs. They first allege that their contract
with the University required that the University
obtain ongoing royalty payments from Nycomed for
the patent, half of which would have belonged to
plaintiffs. As explained above, however, Judge
Lynch has already disposed of this issue; he has
ruled that the University did not have a per se
contractual obligation to obtain a running royalty
from Nycomed. However, plaintiffs also allege that
the University had the contractual obligation to
pursue negotiations vigorously, conduct an
investigation as to who was the true inventor, and
obtain consideration in accordance with industry
standards. As indicated above, Judge Lynch
explicitly declined to resolve these questions in
* Fraud and Deceit (Eighth Claim for Relief):
plaintiffs allege that Nycomed falsely represented
to them that they would receive a substantial
royalty for their invention of the method claimed
in the `744 patent, and engaged in other
fraudulent conduct which led to a grossly unfair
* Interference with Contractual Relations (Tenth
Claim for Relief): plaintiffs allege that
Nycomed, by committing fraud and by acting with
the University to deprive plaintiffs of the true
benefits of their invention, tortiously interfered
with plaintiffs' contractual relationship with the
The primary thrust of Nycomed's summary judgment motion is that Judge
Lynch's earlier ruling requires that these claims be disposed of. In
addition, with respect to the sole inventorship claim, Nycomed argues
that plaintiffs do not have standing to seek relief.
3. Declaration of sole inventorship
As mentioned above, plaintiffs' first cause of action seeks declaratory
judgment that Scott Rocklage is not a coinventor of the `744 patent.
Plaintiffs now move for summary judgment on that issue.
4. 42 U.S.C. § 1983 claim
Finally, plaintiffs have brought a civil rights claim against Carl
Wooten, who was director of the University's Patent and Trade Office
during the negotiations with Nycomed. They allege that his conduct during
the course of negotiations deprived them of their due process rights,
thereby rendering Mr. Wooten liable under 42 U.S.C. § 1983.
Mr. Wooten has moved for summary judgment on this claim, arguing, inter
alia, that plaintiffs have failed to identify a constitutional right that
was allegedly violated by him.
Summary judgment is proper when "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law." Fed.
R.Civ.P. 56(c). An issue is "genuine" only if there is a sufficient
evidentiary basis on which a reasonable fact finder could find for the
nonmoving party, and a dispute is "material" only if it could affect the
outcome of the suit under governing law. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A
principal purpose of the summary judgment procedure is to identify and to
dispose of factually unsupported claims. Celotex Corp. v. Catrett,
477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When "the
record taken as a whole could not lead a rational trier of fact to find
for the non-moving party, there [is] no genuine issue for trial."
Matsushita Elec. Ind. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct.
1348, 89 L.Ed.2d 538 (1986).
As indicated above, plaintiffs and the University have filed
cross-motions for summary judgment on plaintiffs' third cause of action
alleging breach of contract by the University. Next, Nycomed moves for
summary judgment on all claims against it. Third, plaintiffs move for
summary judgment on their first cause of action, seeking correction of
inventorship on the `744 patent. Fourth, defendant Wooten moves for
summary judgment on the civil rights claim asserted against him. The
Court will address each of these questions in turn.
A. Breach of Contract Claim Against the University
Although Judge Lynch has previously ruled that the University did not
have a per se contractual obligation to plaintiffs to obtain a running
royalty in exchange for the exclusive license that it granted to
Nycomed, plaintiffs now argue that the University is liable for the
violation of numerous other contractual duties.
These duties, plaintiffs argue, arise out of three documents—the
assignment agreement, the patent agreement, and the University's patent
policy. Plaintiffs entered into the assignment agreement shortly after
disclosing their invention to the University, relinquishing all rights to
the invention. They signed the patent agreement when they obtained
employment with the University. In that contract, they agreed generally
to relinquish their rights to inventions developed during the course of
their employment with the University. Both of these contracts incorporate
by reference the University's patent policy. Indeed, the assignment
agreement provided that plaintiffs would relinquish all rights and
interests in their invention in exchange for the University exercising
its duties as set forth in the patent policy. The patent policy contains
the language which, plaintiffs argue, imposed upon the University the
contractual duties that are at issue in the case.
The preamble of the patent policy states as follows:
It is the intent of the President of the
University of Caiifornia, in administering the
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 with
respect to their discoveries and inventions in a
manner that is equitable to all parties involved.
In the "statement of policy" portion of the document, it is provided,
inter alia, that employees must assign their inventions and patents to
the University. This section further states that "the University agrees,
for and in consideration of said assignment of patent rights, to pay
annually to the named inventor(s) . . . 50% of the net royalties and fees
received by the University."*fn6
Finally, in the section entitled "Patent Responsibilities and
Administration," the policy sets forth the roles that the various parties
play in the system. It provides that the Senior Vice President "is
responsible for implementation of this Policy, " including the
1. Evaluating inventions and discoveries for
patentability . . .
2. Evaluating the patent or analogous property
rights or equities held by the University in an
invention, and negotiating agreements with
cooperating organizations, if any, with respect to
such rights or equities.
3. Negotiating licenses and license option
agreements with other parties concerning patent
and/or analogous property rights held by the
4. Directing and arranging for the collection and
appropriate distribution of royalties and fees.
5. Assisting University officers in negotiating
agreements with cooperating organizations
concerning prospective rights to patentable
inventions or discoveries made as a result of
research carried out under grants . . .
There can be no doubt that the above-cited provisions
impose some contractual obligations upon the
University, in light of the fact that the patent policy
is expressly incorporated into the assignment
agreement. However, plaintiffs assert that a number of
more specific duties must be implied from these
provisions: 1) a duty to conduct a formal investigation
to determine the "true nature" of the invention; 2) a
duty to make a formal determination as to who was the
true inventor of the method; 3) a duty to determine the
true research sponsor of the invention, and; 4) a duty
to determine the true value of the invention.
As a preliminary matter, it is not clear from
plaintiffs' written or oral submissions whether they
believe these precise duties exist every time the
University negotiates a licensing agreement with a
private entity, or just in this specific factual
context. To the extent that they argue that the patent
policy imposes these four obligations upon the University
per se, plaintiffs have presented no evidence in support
of this notion. Indeed, the uncontroverted testimony of
Dr. Wooten, president of the University's patent office
at the time, establishes that the University conducted a
formal inventorship determination with respect to the
inventions of its employees only on the rare occasion
that concerns arose about inventorship. Nor have
plaintiffs shown that the University was required to go
behind the inventors' uncontroverted representations to
conduct further investigation into the "true funding
source" of the invention. Given the absence of any
evidence to the contrary, the Court finds that the
patent policy does not subject the University to the
contractual obligations asserted by the plaintiffs on a
per se basis.
Rather than requiring the University to complete the
specific steps set forth by the plaintiffs, it is clear
from the language of the patent policy and the customary
manner in which the University discharges its duties
pursuant to this policy that the contract calls for the
University to exercise a substantial amount of
discretion when fulfilling its role in the intellectual
property system. For example, the provision that gives
the University responsibility for "[n]egotiating
licenses and license option agreements with other
parties" clearly implies that the University will
exercise its discretion in conducting such
negotiations; the policy does not impose a particular
procedure that the University must follow, nor a
particular substantive goal that the University is
required to achieve.
Of course, the fact that the patent policy leaves much
to the discretion of the University does not mean that
the University has no contractual obligation to
plaintiffs. "Where a contract confers on one party a
discretionary power affecting the rights of the other, a
duty is imposed to exercise that discretion in good
faith and in accordance with fair dealing." Perdue v.
Crocker National Bank, 38 Cal.3d 913, 923,
216 Cal.Rptr. 345, 702 P.2d 503 (1985); see also Locke
v. Warner Bros., Inc., 57 Cal.App.4th 354, 363,
66 Cal.Rptr.2d 921 (1997). In this spirit, plaintiffs
suggest that given the facts and circumstances of the
present case, the University's failure to conduct a
formal inventorship determination, a determination as to
who was the true funding source of the invention, and a
thorough investigation into the "true nature" of the
invention constituted a breach of contract. In other
words, they suggest that even if the University does not
have a per se contractual obligation to conduct these
activities, its failure to do so in this particular case
was an act of bad faith.
Again, however, plaintiffs have failed to submit
evidence that the University acted in bad faith. Viewing
the evidence in the light most favorable to plaintiffs,
the most that can be said is that the University was
misled into signing away its rights to the patented
method for substantially less than those rights were
This purported error was caused by a number of
factors, not the least of which was plaintiffs' own
failure to submit what they now claim to be the proper
information to the University. For example, plaintiffs
contend that the University failed to properly determine
the inventors of the patented method, yet it was
plaintiffs who initially informed the University, through
the disclosure form faxed by Dr. Kucharczyk, that Dr.
Rocklage was a co-inventor. Indeed, as Judge Lynch
found, plaintiffs were aware for years that the
University treated Dr. Rocklage as a co-inventor and
never did anything to contradict this view. The
University did not act in bad faith by failing to go
beyond the representations and repeated confirmations of
its employees— who were, after all, most familiar
with the invention—to conduct an investigation as
to whether these representations were correct.
Another factor contributing to the error, according to
plaintiffs, was Nycomed's fraudulent misrepresentations
to the University regarding the invention's profitmaking
potential. Again, plaintiffs present no evidence that
University officials somehow sanctioned or took part in
these misrepresentations. Nycomed's alleged
misrepresentations are, of course, relevant to the
question whether Nycomed may be liable to plaintiffs, as
discussed below. However, the evidence that plaintiffs
have presented in this regard provides further
indication that the University did not act in bad
faith. For example, plaintiffs present evidence that
Nycomed told the University that the patent was
essentially valueless, while at the same time telling
plaintiffs that they would become wealthy once the patent
was approved. See Section C, infra. This evidence, if
true, supports the notion that plaintiffs and the
University were both "duped" by Nycomed, and contradicts
the notion that the University acted in bad faith.
Furthermore, plaintiffs have failed to explain why the
University would have acted in bad faith when conducting
negotiations with Nycomed. Indeed, the purported mistake
harmed the University as much as the plaintiffs - each
was entitled to 50% of the revenue derived from the
licensing agreement. Plaintiffs have not provided any
evidence to explain why the University might have
intentionally derogated its responsibilities in order to
help Nycomed, thereby depriving the Regents of
Plaintiffs may very well be correct that the
University would have negotiated a running royalty or
some other more valuable consideration in exchange for
the license had it conducted a more thorough
investigation into the nature and origin of the
invention.*fn7 This fact, however, does not confer a
valid breach of contract claim upon the plaintiffs.*fn8
Plaintiffs have failed to submit evidence upon which a
reasonable jury could conclude that the University acted
in bad faith.*fn9 Therefore, the Regents' cross-motion
for summary judgment plaintiffs' third cause of action
must be granted.*fn10
B. Nycomed's Motion for Summary
Judgment on Plaintiffs' Inventorship
Plaintiffs' first claim for relief arises under
35 U.S.C. § 256, which creates a federal cause of
action for correction of inventorship. The statute reads
Whenever through error a person is named in an
issued patent as the inventor, or through error an
inventor is not named in an issued patent and such
error arose without any deceptive intention on his
part, the Commissioner may, on application of all
the parties and assignees, with proof of the facts
and such other requirements as may be imposed,
issue a certificate correcting such error.
The error of omitting inventors or naming persons
who are not inventors shall not invalidate the
patent in which such error occurred if it can be
corrected as provided in this section. The court
before which such matter is called in question may
order correction of the patent on notice and
hearing of all parties concerned and the
Commissioner shall issue a certificate
35 U.S.C. § 256.*fn11
Defendants have moved for summary judgment on this question, based on
the argument that plaintiffs do not have standing to seek a correction of
inventorship.*fn12 Plaintiffs respond with their own motion for summary
judgment, arguing that in addition to having standing, they are able to
demonstrate as a matter of law that Dr. Rocklage was not a co-inventor.
However, it is unnecessary for the Court to determine inventorship under
section 256, because defendants are correct that plaintiffs have no
standing to assert this claim.
As mentioned earlier, the Regents' patent policy expressly required
plaintiffs to assign title to any inventions to the Regents as a condition
of their employment. In connection with the invention that was eventually
claimed in the `744 patent, plaintiffs executed an assignment agreement
pursuant to the patent policy transferring their "entire right, title and
interest" in the patent to the Regents "for its own use . . . as fully
and entirely as the same would have been held and enjoyed by the
assignors had this sale and assignment not been made." (emphasis added).
Plaintiffs do not dispute that the University is the proper owner of
the `744 patent. Thus, regardless of whether Dr. Rocklage is listed as a
co-inventor or not, plaintiffs will have no interest in the patent
whatsoever. The only reasonable interpretation of the assignment
agreement is that plaintiffs relinquished their right to sue to correct
inventorship—along with all other rights pertaining to the
patent—when they executed the contract.
Plaintiffs respond that even though they assert no ownership interest
in the patent, they nonetheless retain an interest in preventing the
patent from erroneously listing Dr. Rocklage as their co-inventor. They
suggest that section 256 grants them standing to assert this interest by
virtue of its requirement that "all parties concerned" be noticed when a
court is entertaining a claim for correction of inventorship. However,
plaintiffs have been unable to provide any reference to the legislative
history of the statute that would demonstrate a Congressional intent to
allow someone who has disclaimed all rights and interests in a patent to
sue for a correction of inventorship. Rather, as the entirety of the case
law demonstrates, the statute is invoked when an errant or fraudulent
listing of inventorship allegedly deprives the plaintiff of his rightful
ownership interest in the patent. See, e.g., Stark v. Advanced
Magnetics, Inc., 119 F.3d 1551 (Fed.Cir. 1997); Hess v. Advanced
Cardiovascular Systems, 106 F.3d 976 (Fed.Cir. 1997); MCV Inc. v.
King—Seeley Thermos Co., 870 F.2d 1568 (Fed. Cir. 1989); Heden v.
Hill, 937 F. Supp. 1222 (S.D.Tex. 1996); Fina Technology, Inc. v. Ewen,
857 F. Supp. 1151 (N.D.Tex. 1994). If the section 256 inventorship
determination impacts a plaintiffs ownership rights in a patent, that
plaintiff naturally has an interest in bringing the claim. However,
plaintiffs can point to no case in which an individual concededly had no
ownership interest in a patent, yet invoked section 256 to correct the
inventorship listing for that patent.
The one case plaintiffs cite in support of their contention that they
may avail themselves of section 256 is unpersuasive. In Fina Technology
v. Ewen, supra, a patent owner, Fina, sought a declaratory judgment under
section 256 that the two listed inventors were in fact the correct
inventors of the patented invention. Fina sought this judgment in order
to preclude one of the listed inventors, Ewen, from claiming that the
other inventor, Razavi, was improperly listed. Id. at 1154-56. Ewen's
claim in this regard was part of a larger effort in state court to
contest Fina's ownership of the patent. Id. at 1153. Like the case at
hand, the co-inventors had assigned their rights in the patent to Fina.
Id. at 1158.
Although Razavi was not a party to the suit, the district court allowed
him to "appear" as a concerned party pursuant to section 256. Id. at
1156. He did so to support the owner's claim that he was a co-inventor of
the patent. However, Razavi further sought a declaration that' he was the
sole inventor of the patent at issue. The district court ruled that
although Razavi could properly participate as a "concerned party"
pursuant to section 256,
"the Court does not read that section as allowing
a concerned party to function as the equivalent of
a party to the suit. Although Razavi has those
rights provided by section 256, he may not seek
affirmative relief—in this case, correction
of inventorship—unless he intervenes. It
seems that he could also file a separate suit."
Id. (emphasis added).
Plaintiffs seize on the dicta highlighted above and argue that a
co-inventor has standing to file suit to remove the name of another
ostensible co-inventor from a patent, even if the plaintiff has assigned
all rights and interests in that patent. However, in light of plaintiffs'
failure to make any showing that Congress intended to grant standing
under section 256 to a plaintiff who seeks to remove the name of a
co-inventor even though that plaintiff has relinquished all interest in
the patent, the Court declines to adopt this dicta and construe the
statute so broadly. Plaintiffs have assigned away all rights and
interests in the `744 patent to the Regents. Should the Regents desire to
remove the name of Dr. Rocklage from the patent, it of course has
standing under the statute to seek this remedy. However, the plaintiffs,
having relinquished all interest in the patented, invention, have also
relinquished their standing to sue under section 256.
It is particularly appropriate to reject plaintiffs' interpretation of
the statute in light of the serious constitutional questions such a broad
interpretation would raise. As the Supreme Court has repeatedly
explained, the "irreducible constitutional minimum of standing contains
three elements - actual injury, causation, and redressability. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351
(1992). There is a strong possibility that plaintiffs fail to meet these
First, plaintiffs suggest that the "accuracy of the named inventors of
a patent is an interest that an inventor has in the patent, irrespective
of whether the inventor owns the patent." Plaintiffs' counsel elaborated
on this theme at oral argument by arguing that Dr. Kucharczyk and Dr.
Moseley should have standing because they are "proud" of their
invention, and they are therefore injured by the presence of Dr.
Rocklage's name on the patent. These assertions suggest that plaintiffs
are seeking the kind of "psychic satisfaction [that] is not an acceptable
Article III remedy because it does not redress a cognizable Article III
injury." Steel Co. v. Citizens for a Better Environment, 523 U.S. 83,
— , 118 S.Ct. 1003, 1019, 140 L.Ed.2d 210 (1998). If plaintiffs
were correct that section 256 grants them standing on the grounds that
they are proud of their invention, then the statute would be in grave
danger of running afoul of Article III.
Second, plaintiffs argue that they were injured because, by
fraudulently causing Dr. Rocklage's name to be included on the patent,
Nycomed caused the plaintiffs to he deprived of substantial royalties
that they otherwise would have received. Although this allegation
sufficiently describes an "actual injury," removing Dr. Rocklage's name
from the patent pursuant to section 256 would not redress it. To redress
the injury arising out of Nycomed's alleged fraud, plaintiffs would have
to obtain a jury verdict that such fraud occurred.
Although plaintiffs resist Nycomed's standing argument strenuously,
this holding actually has no negative consequences for them.*fn13 As
stated above, a declaration that they are the sole inventors of the `744
patent obtains them no ownership interest in the patent. Furthermore,
dismissal of their section 256 claim does nothing to prevent plaintiffs
from asserting their state law claims for fraud against Nycomed, because
they are still free to establish that Nycomed fraudulently caused them
and the University to believe Dr. Rocklage was a co-inventor.*fn14 This
will be one important issue for the jury to consider when deciding if
Nycomed is liable in tort to the plaintiffs. However, in light of
plaintiffs' lack of standing under section 256, the Court does not have
jurisdiction as a matter of law to determine inventorship pursuant to
that provision. Accordingly, plaintiffs' first cause of action must be
dismissed for lack of jurisdiction.*fn15
C. Nycomed's Summary Judgment Motion on
Plaintiffs' Remaining Claims
After dismissal of the first cause of action under 35 U.S.C. § 256,
four claims remain against Nycomed: 1) breach of contract, on the theory
that Nycomed breached its funding agreement with the University, to which
plaintiffs were allegedly third party beneficiaries; 2) inducing breach of
contract, on the theory that Nycomed's misrepresentations caused the
University to breach its assignment agreement and licensing agreement
with plaintiffs; 3) fraud and deceit, based on Nycomed's overall
conduct; and 4) interference with contractual relations.
In light of the Court's ruling that the University did not breach its
contracts with plaintiffs, the claim against Nycomed for inducing breach
of contract must fail as well. This leaves three claims against Nycomed
to be adjudicated.
1. Plaintiffs' tort claims
Two of the remaining three causes of action against Nycomed sound in
tort— plaintiffs' claims for fraud and deceit (Eighth Claim for
Relief) and interference with contractual relations (Tenth Claim for
Relief). These claims arise from the totality of plaintiffs' factual
allegations regarding Nycomed's conduct.
Nycomed argues that Judge Lynch's opinion, which is the law of the
case, disposes of these issues. However, as explained previously, Judge
Lynch's ruling is actually quite narrow—he merely held that the
University had no per se obligation to obtain a running royalty in
exchange for a license in all cases, and that the University was not
arbitrary and capricious in its decision to enter into the licensing
agreement with Nycomed. Although the University was not required to
obtain a running royalty, the question remains open whether the
University would have obtained a running royalty but for Nycomed's
Further, although Judge Lynch ruled that the University was not
arbitrary and capricious, that determination rested on his assessment of
the information the University had before it at the time. This ruling
does not preclude a finding that Nycomed improperly withheld information
from the University, thereby defrauding the University into depriving
itself and its employees of valuable consideration for the rights to the
Plaintiffs have submitted sufficient evidence to create a genuine issue
of material fact regarding Nycomed's fraudulent conduct, thereby
warranting a denial of summary judgment on these two causes of action.
First, they submit declarations by Dr. Kucharczyk and his research
assistant at the time, Ms. Asgari. Dr. Kucharczyk states that in January
1990, Nycomed patent manager Alan Watson told him that he believed the
patent had great commercial value and that Kucharczyk and Dr. Moseley
could expect significant royalties if the patent issued and was licensed
to Nycomed. Ms. Asgari declares that Watson told her in 1991, after the
licensing agreement had been entered into, that she and Dr. Kucharczyk
would become rich from the patent and would never have to worry about
Next, plaintiffs submit repeated correspondence between Watson and the
University which took place between March 7 and March 9, 1990, in which
Watson represented that the patent was of limited value and refused to
offer a running royalty. Kucharczyk asserts that despite this
insistence, and despite the fact that Watson was in contact with
Kucharczyk during these dates, Watson never told Kucharczyk of his change
in position regarding the value of the invention. Indeed, as mentioned
above, Ms. Asgari claims that Watson was even misrepresenting his
position regarding the value of the patent in 1991—after he had
already entered into the agreement.
Plaintiffs further argue that if they had been aware of Nycomed's
negotiating posture, they would have intervened to prevent themselves and
the University from being defrauded. Nycomed would then have had to pay
much more money for the license, or the University could have entered
into negotiations with another party. However, because Nycomed misled
plaintiffs about its beliefs regarding the value of, the invention,
plaintiffs mistakenly believed that a substantial running royalty was
Next, Dr. Kucharczyk indicates that Nycomed made other
representations, outside the context of its negotiations with the
University, that the patent was extremely valuable. For example, UC and
Nycomed applied jointly for a $150,000 research grant for the `744 patent
and claimed that the commercialization of the method and its use with
S-043 would produce "anticipated annual revenues in excess of $380
million at maturity." He also indicates that he attended a meeting with
Dr. Rocklage in Pasadena in which Rocklage gave a video presentation
which made the claim that S-043 had a market potential of $300 million.
Dr. Kucharczyk claims that the only reason S-043 had developed such a
substantial market potential is the development of the patented method.
The fact that the method created a demand for S-043, he asserts, made the
patent extremely valuable for Nycomed.
Based on the foregoing evidence, when viewed in a light most favorable
to the plaintiff, there is a genuine issue of material fact on the
question whether Nycomed defrauded plaintiffs and the University, thereby
causing the University to sign away its valuable rights to the `744
patent for a minimal amount.
Furthermore, there is a genuine issue of material fact on the "question
whether Nycomed interfered with plaintiffs' contractual relations with
the University. The elements of intentional interference with contractual
relations are: 1) a valid contract between plaintiff and a third party;
2) defendant's knowledge of this contract; (3) defendant's intentional
acts designed to induce a breach or disruption of the contractual
relationship;*fn16 (4) actual breach or disruption of the contractual
relationship; and (5) resulting damage. Quelimane Co. v. Stewart Title
Guar. Co., 19 Cal.4th 26, 55-56, 77 Cal.Rptr.2d 709, 960 P.2d 513
(1998). At a minimum, the University was contractually obligated to give
plaintiffs 50% of whatever they received in exchange for the license. As
set forth above, plaintiffs have presented evidence that Nycomed was
aware of this arrangement, and that the University's performance under
this contract was adversely affected by the alleged fraud committed by
Nycomed against plaintiffs and the University.
Therefore, Nycomed's motion for summary judgment on plaintiffs' eighth
and tenth claims must be denied.
2. Breach of contract-third
party beneficiary theory
Plaintiffs' fourth cause of action asserts that Nycomed breached its
funding agreement with the University, and that plaintiffs have standing
as third party beneficiaries to sue for this breach. The University and
Nycomed entered into this research funding agreement on April 12, 1990.
The agreement provided money to the University to fund Dr. Kucharczyk's
Nycomed argues that summary judgment is required by Judge Lynch's
opinion, which held that "[b]ecause the plaintiffs are not parties to this
agreement, the Court finds that the Research Funding Agreement does not
confer any contract rights on them." 946 F. Supp. at 1431. It asserts
that this finding by Judge Lynch encompasses the third party beneficiary
situation and is the law of the case, thereby automatically defeating
plaintiffs' fourth cause of action.
However, Judge Lynch did not specifically address the question whether
plaintiffs were third party beneficiaries to the research funding
agreement. Furthermore, after issuing his summary judgment ruling, Judge
Lynch allowed plaintiffs to amend their complaint to assert this theory.
In light of the fact that Judge Lynch allowed plaintiffs to amend their
complaint, and in light of the fact that he did not specifically address
the third party beneficiary question, this Court must assume that the
question whether plaintiffs were third party beneficiaries to the
research funding agreement has yet to be adjudicated.
California Civil Code Section 1559 provides that "a contract, made
expressly for the benefit of a third person, may be enforced by him at
any time before the parties thereto rescind it." Here, the agreement
explicitly indicates that it was designed to advance the research of Dr.
Kucharczyk that specifically related to the `744 patent. Further, there
is evidence that both Nycomed and the University knew that plaintiffs
were entitled to 50% of any income received by the University in
connection with a licensing agreement arising out of an invention
financed by the research funding agreement. Therefore, plaintiffs may
properly be considered third party beneficiaries to the research funding
Furthermore, there is a genuine factual dispute on the question whether
Nycomed breached the research funding agreement. Paragraph 9.2 of that
contract, which was adopted on April 12, 1990, states: "University and
Sponsor agree to negotiate the signing of a mutually acceptable agreement
covering the disposition of intellectual property rights and the
licensing of any patentable New Invention prior to disbursement of Grant
Funds." As indicated in the discussion of plaintiffs' tort claims above,
there is a factual issue as to whether Nycomed defrauded the University
during negotiations over the licensing agreement, which was adopted in
June 1990. If Nycomed did so, it certainly would appear to have breached
Paragraph 9.2 of the research funding agreement.
Therefore, there is a genuine issue of fact on the question whether
Nycomed is liable to plaintiffs as third party beneficiaries of the
research funding agreement. Nycomed's motion for summary judgment on this
issue must be denied.
D. Plainttffs' Civil Rights Claim
Finally, plaintiffs argue that Carl Wooten, who was the director of the
University's Patent Office during the relevant period, is liable under
42 U.S.C. § 1983 for violation of their constitutional rights. Wooten
is clearly entitled to summary judgment on this claim.
To show that an official is liable under 42 U.S.C. § 1983, the
plaintiff must first identify a specific constitutional right allegedly
violated by that official. Siegert v. Gilley, 500 U.S. 226, 232, 111
S.Ct. 1789, 114 L.Ed.2d 277 (1991). In light of the fact that plaintiffs
have not even shown that the University could have breached its
contractual obligations to them, they certainly have not been able to
identify a constitutional right that Dr. Wooten may have violated.
Therefore, defendant Wooten is entitled to summary judgment on this
In light of the foregoing, the Court rules as follows:
Plaintiffs' motion for summary judgment on their third cause of
action-alleging breach of contract against the University-is DENIED. The
University's crossmotion for summary judgment on this cause of action is
Plaintiffs' first cause of action under 35 U.S.C. § 256 is
DISMISSED for lack of subject matter jurisdiction.
Nycomed's motion for summary judgment on plaintiffs' fifth cause of
action for inducing breach of contract is GRANTED.
Nycomed's motions for summary judgment on plaintiffs' fourth, eighth,
and tenth causes of action, alleging breach of the research funding
agreement, fraud, and interference with contractual relations, are
Defendant Carl Wooten's motion for summary judgment on plaintiffs claim
pursuant to 42 U.S.C. § 1983 is GRANTED.
IT IS SO ORDERED.