Cephalon, Inc. v. Johns Hopkins University, No. 3505-VCP (Dec. 18, 2009), read opinion here. This 36-page opinion from the Delaware Court of Chancery deserves a separate article in a publication dedicated to patent litigation but in this brief post we will highlight those aspects of the ruling that are likely to be of interest generally to those who make their living engaged in business litigation, otherwise categorized as corporate and commercial law.
In the context of a summary judgment motion, the Court ruled on the rights to a patent developed by a medical researcher at Johns Hopkins University (JHU) in connection with funding provided by Cephalon. The vice chancellor who authored this opinion often handled patent litigation as a lawyer before he joined the bench and has served as a mediator for cases pending before the United States Court of Appeals for the Federal Circuit (dealing with patent litigation). This decision also is indicative of the type of technology-related disputes to which the Chancery Court is formally receptive. See, e.g., 10 Del. C. Section 346 (vesting the Court of Chancery with jurisdiction to adjudicate proceedings initiated for the purpose of mediating disputes relating to technology–broadly defined to include without limitation, computer software licenses, biological or pharmaceutical or other technology that has commercial value, or the "intellectual property rights pertaining thereto…." See Section 346(c)(1).
The Court begins its opinion by describing this case as involving a "research relationship gone sour". Cephalon sponsored the leukemia research of Dr. John Small, a JHU employee, with whom Cepahalon entered into a separate consulting agreement. Years after the agreements expired, JHU applied for a patent on an invention by Dr. Small that allegedly was made with Cephalon property. After learning of the patent application, Cephalon filed suit seeking, inter alia, a declaratory judgment that it owned the invention described in the patent application. The Court granted in part and denied in part the motion for summary judgment filed by JHU, and found that: "… there is no substantial controversy that Small and JHU did not reduce the invention to practice directly …." In addition, based on the applicable agreements among the parties, the Court found that JHU was entitled to summary judgment on the claims of ownership of the invention.
The opinion describes in great detail the medical, biological and related scientific terms at issue. For example, the project the parties were involved in focused on "the effect of two Cephalon compounds, CEP-5214 and CEP-7055, on FLT3." See footnote 3 for a technical definition of FLT3, a member of the "receptor tyrosine kinase family". See also footnote17 for a comparison of the definitions of in vivo and in vitro. The research project involved in vivo experiments with mice and use of the compounds in vitro on human leukemic cells. The foregoing should give readers a small taste of the extensive technical, scientific discussion from the Court’s opinion.
Procedurally, despite substantial factual issues on the eleven separate counts in the amended complaint, the Court permitted the parties to file a "narrow, partial" summary judgment motion on a contract interpretation issue that only required minimal discovery, but an early resolution of this issue would reduce long-term expenses for all parties. Limited discovery was permitted after the opening brief was filed.
Partial Summary Judgment Standard
After discussing the familiar standard applied to summary judgment motions, the Court acknowledged that even if the motion for partial summary judgment in this case were granted, all eleven counts of the complaint would still remain for trial. Thus, the court focused on subsection (d) of Rule 56. In particular, if a trial is still necessary after a summary judgment motion, but the court still finds that there are uncontroverted facts, "it shall thereupon make an order specifying the facts that appear without substantial controversy… and direct further proceedings in the action that are just. Upon the trial of action the facts so specified shall be deemed established, and the trial shall be conducted accordingly." See Rule 56(d).
The main agreement between the parties was governed by Maryland law and therefore will not be treated on this blog other than in passing. What is especially noteworthy, is that the Court relied on decisions of the U.S. Court of Appeals for the Federal Circuit for the definition of "terms of art in the field of intellectual property law" that were not defined in the parties’ agreement, and as no evidence was presented as to their meaning, the Court relied on the opinions of that court to accord the terms "their usual meaning to persons in the field of intellectual property law, and patent law in particular." See footnote 62 referring to definitions of "conception" and "reduction to practice" in the field of intellectual property (noting that the U.S. Court of Appeals for the Federal Circuit has exclusive jurisdiction over appeals in patent cases and their decisions are relevant authority for matters relating to patent law). See also footnotes 70 and 71 (citing cases that define the elements that must be established to "demonstrate reduction to practice of an invention claimed in a patent application.")
The parties’ consulting agreement involved in this case was governed by Delaware law. This was separate from the "primary" agreement governed by Maryland law. The Court observed the truism that in Delaware the "determination of whether a contract is ambiguous is a question for the court to resolve as a matter of law", often in ruling on a motion for summary judgment. (footnote 77). Moreover, although extrinsic evidence cannot be used to create an ambiguity where one does not exist on the face of the contract, it may be introduced to assist with "an understanding of the context and business circumstances under which the language was negotiated…." (footnote 83).
In sum, the Court granted JHU’s motion for partial summary judgment: "… insofar as it seeks judgment on: (1) Cephalon’s claim that it owned the autoimmune invention under the SRA because the invention was reduced to practice directly in the conduct of the Project and (2) Cephalon’s claim that the SSA granted it ownership of the autoimmune invention."
The Court further concluded, pursuant to Court of Chancery Rule 56(d), that:
(1) it is without substantial controversy that the autoimmune invention was not reduced to practice directly in the conduct of the Project, and (2) Cephalon is not entitled to ownership of the autoimmune invention under the terms of the parties’ SSA agreement. However, the Court clarified that it denied JHU’s motion for partial summary judgment on Cephalon’s claim that it is entitled to ownership of the autoimmune invention under the parties’ separate SRA agreement because the invention was conceived directly in the conduct of the Project.