UNIVERSITY OF SOUTH FLORIDA BOARD OF TRUSTEES v. USARESPONSE to 118 MOTION for Partial Summary Judgment The United States Does Not Enjoy a License under the '094 PatentFed. Cl.February 15, 2019 THE UNITED STATES COURT OF FEDERAL CLAIMS UNIVERSITY OF SOUTH FLORIDA, BOARD OF TRUSTEES, Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) ) No. 15-1549 Judge Patricia Campbell-Smith DEFENDANT’S OPPOSITION TO MOTION BY USF FOR PARTIAL SUMMARY JUDGMENT—THE UNITED STATES DOES NOT ENJOY A LICENSE UNDER 35 U.S.C. § 202 JOSEPH H. HUNT Assistant Attorney General GARY L. HAUSKEN Director WALTER W. BROWN Senior Litigation Counsel Commercial Litigation Branch Civil Division Department of Justice Washington, D.C. 20530 walter.brown2@usdoj.gov Telephone: (202) 307-0341 Facsimile: (202) 307-0345 February 15, 2019 Attorneys for the United States Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 1 of 35 i TABLE OF CONTENTS Table of Contents ............................................................................................................................. i Table of Authorities ....................................................................................................................... iii I. Summary of Argument ....................................................................................................... 1 II. Counterstatement of Material Facts .................................................................................... 3 A. Government’s Responses to USF’s Statement of Material Facts ........................... 3 B. Government’s Statement of Material Facts ............................................................ 9 1. USF’s First Actual Reduction to Practice ................................................... 9 2. NIH Grant No. AG14633 .......................................................................... 11 3. Funds Were Provided Under NIH Grant No. AG14633 to USF and Dr. Duff Prior to Actual Reduction to Practice. .............................................. 12 4. Further Evidence of USF Funding through the AG14633 Grant .............. 13 a) USF Financial Records ................................................................. 13 b) Dr. Marcia Gordon ........................................................................ 14 c) Progress Report ............................................................................. 15 III. Argument .......................................................................................................................... 16 A. Summary Judgment Standard ............................................................................... 16 B. Bayh-Dole Act ...................................................................................................... 17 C. A Bayh-Dole License Is an Affirmative Defense to USFs Infringement Claims. 19 D. USF Improperly Requires Proof of a Bayh-Dole License by a Formal Subcontract. .......................................................................................................... 20 E. Dr. Morgan Testified That the AG14633 Grant Funded USF Work Leading to the Inventions Claimed in the ’094 Patent. ........................................................... 22 F. The NIH-Funded USF Work Included the Alleged Actual Reduction to Practice in April 1997. .......................................................................................... 24 G. USF’s Financial Records Indicate NIH Grant Funds Flowed to USF during the Relevant Time Period. .......................................................................................... 26 Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 2 of 35 ii H. Dr. Gordon’s Testimony and Curriculum Vitae Also Evidence that USF Received NIH Grant Funds Prior to the Actual Reduction to Practice. ................ 27 I. The 1998 Nature Paper Was Touted As a Grant Achievement to Receive Additional AG14633 Funds, But Now USF Denies that an NIH Grant Funded the Same Work in the ’094 Patent. ....................................................................... 27 J. The Evidence of Record Clearly Shows That a Subcontract Existed Between USF and Mayo. ..................................................................................................... 28 IV. Conclusion ........................................................................................................................ 29 Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 3 of 35 iii TABLE OF AUTHORITIES Cases Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970) .......................................................................................................... 16 Alph C. Kaufman, Inc. v. Cornerstone Indus. Corp., 540 S.W.3d 803 (Ky. App. 2017) ..................................................................................... 22 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .......................................................................................................... 16 Balt. & Ohio R.R. Co. v. United States, 261 U.S. 592 (1923) .......................................................................................................... 29 Campbell Plastics Eng’g & Mfg. v. Brownlee, 389 F.3d 1243 (Fed. Cir. 2004)......................................................................................... 17 Cent. Admixture Pharm. Servs. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347 (Fed. Cir. 2007)......................................................................................... 18 Madey v. Duke Univ., 413 F. Supp. 2d 601 (M.D.N.C. 2006) ............................................................................. 20 Nitol v. United States, 7 Cl. Ct. 405 (1985) .......................................................................................................... 29 Starr Int’l Co. v. United States, 128 Fed. Cl. 20 (2014) ...................................................................................................... 16 Tayloe v. Riggs, 26 U.S. 591 (1828) ............................................................................................................ 22 Technical Dev. Corp. v. United States, 597 F.2d 733 (Ct. Cl. 1979) .............................................................................................. 20 Technitrol, Inc. v. United States, 440 F.2d 1362 (Ct. Cl. 1971) ............................................................................................ 20 Statutes 28 U.S.C. § 1498 ........................................................................................................................... 19 35 U.S.C. § 200 ............................................................................................................................. 17 35 U.S.C. § 201 ............................................................................................................. 1, 18, 21, 29 35 U.S.C. § 202 ............................................................................................................. 1, 17, 21, 29 Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 4 of 35 iv Patent and Trademark Law Amendments Act, Pub. L. 96-517, 94 Stat. 3015 (Dec. 12, 1980) ... 17 Other Authorities Richard A. Lord, Williston on Contracts (4th ed. 1990) ............................................................... 21 Rules Fed. R. Civ. P. 56 .......................................................................................................................... 16 Regulations 37 C.F.R. § 401.14 ........................................................................................................................ 19 37 C.F.R. §§ 401.1–16 ............................................................................................................ 17, 18 Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 5 of 35 1 Defendant, the United States of America (the government), hereby respectfully submits this response in opposition to Plaintiff University of South Florida Board of Trustees’ (USF’s) Motion for Partial Summary Judgment that the United States Does Not Enjoy a License under 35 U.S.C. § 202 (Dkt. No. 118). As explained in detail below, USF’s motion should be denied based on the numerous issues of material fact, as the weight of the evidence strongly supports the government’s position that National Institutes of Health (NIH) grant funds were used to develop the claimed inventions of U.S. Patent No. 5,898,094 (the ’094 patent). This includes USF’s first actual reduction to practice alleged by USF to have occurred in April 1997, months after the NIH grant-at-issue, NIH Grant1 No. 1P01AG014633 (the AG14633 grant), was awarded to the grantee, the Mayo Clinic (Mayo) and monies began flowing to USF as Mayo’s subgrantee. Thus, the government has an irrevocable license to the ’094 patent. I. SUMMARY OF ARGUMENT USF argues that the inability of any party to produce a copy of an express written subcontract between USF and Mayo for the first year of an NIH grant forecloses the assertion of a government license under the Bayh-Dole Act. This argument applies a standard of proof absent in the statute (35 U.S.C. § 202) and any other legal authority. In this situation where a subject invention by a subgrantee (USF) is alleged to have been funded by a NIH grant, the statute (35 U.S.C. § 201(b)) merely requires that the funds were provided under a “funding agreement,” which includes a “subcontract of any type.” This is not limited to an express written contract and would include implied (unwritten) contracts. Likewise, the absence of a written subcontract does not foreclose the ability to prove such a contract existed. 1 This grant was awarded by the National Institute on Aging (NIA), an institute of NIH. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 6 of 35 2 Based on its limited view of a viable subcontract, USF’s arguments ignore the vast evidence showing that the AG14633 grant funded research leading to the “subject invention(s)” of the ’094 patent, namely the first actual reduction to practice, alleged by USF to have occurred in April 1997. By that time, according to Dr. David Morgan (who was Project Leader over the relevant work at USF), funds undoubtedly would have been flowing to USF from Mayo, and clearly would have funded the April 1997 reduction to practice. Dr. Morgan’s position is supported by USF’s financial records, a grant progress report, and testimony from Dr. Marcia Gordon, a member of Morgan’s USF laboratory who was directly involved in the reduction to practice. Most notably, the financial records show that an account associated with the grant paid Dr. Gordon’s salary during the relevant time period, and Dr. Gordon’s own curriculum vitae confirms the same. Also, USF’s patented work was published in the 1998 Nature Paper2, which Dr. Gordon confirms heavily involved work performed by her and her graduate student. In addition to specifically referencing AG14633 grant support in the publication itself, Mayo also touted the article as a major achievement accomplished by the researchers in seeking additional NIH funding for the third year of the grant. In short, overwhelming evidence supports the existence of NIH funding of USF’s alleged first reduction to practice, and in turn, of a subcontract between Mayo and USF. 2 The 1998 Nature Paper is often referred to in Dr. Morgan’s deposition transcript (and in other documents) as the 1998 Nature Medicine Paper or Article, see, e.g., Ex. 5 at 77:3–6, which is consistent with the full name of the publication cited. See Holcomb et al., “Accelerated Alzheimer-Type Phenotype in Transgenic Mice Carrying Both Mutant Amyloid Precursor Protein and Presenilin 1 Transgenes,” Nature Medicine 4 97–100 (1998). This brief uses these references interchangeably. Thus, the 1998 Nature Medicine Paper is the same as the 1998 Nature Paper. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 7 of 35 3 II. COUNTERSTATEMENT OF MATERIAL FACTS A. GOVERNMENT’S RESPONSES TO USF’S STATEMENT OF MATERIAL FACTS USF’s Statement of Material Facts Not in Dispute (Nos. 1–18) contain many factual assertions that are disputed, immaterial, and unfounded. In accordance with Rule 56(c) of the Rules of the Court of Federal Claims (RCFC), each of these asserted facts are addressed individually below: 1. John Hardy and Karen Duff conceived of the invention of the ‘094 Patent (Ex. 10) while both were at USF in 1995. While the first date of conception is not known, conception had to have occurred no later than September 1995, when Hardy described it in an application for a grant submitted to NIH/NIA (Ex. 18). Transcript of the Deposition of Karen Duff KD (Ex. 1), 96: 9–97; KD 202: 13–22, Transcript of the Deposition of Stephen Snyder the Government’s witness under Rule 30(b)(6), SS (Ex. 3) 98:1–99. Response: Denied. There is no evidence of a 1995 conception date by USF, and more specifically, no required documentation. Indeed, USF contends that the cited grant application did not fund any of inventive work (conception or reduction to practice) leading to the patent application that ultimately became the ’094 patent. See Dkt. No. 118 at 15. Dr. Duff’s cited testimony does not appear to support these allegations. Dr. Duff testified that USF had no corroborating records of this conception, and that there was merely a “discussion” of the invention at that time. Ex. 1 at 101:24–102:4; see also id. at 97:9–98:22. There is also no evidence of a conception in the grant application that was submitted to NIH in September 1995, and USF makes no specific citation to such evidence in Exhibit 18. Moreover, Dr. Morgan testified that they “wrote that grant before the idea of [these double-transgenic mice] were developed, but by the time we got the grant, this idea was well in place and underway.” Ex. 5 at 37:15–17. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 8 of 35 4 2. John Hardy left USF for the Mayo Clinic, and directed the grant application be transferred to him at the Mayo Clinic, before the grant was approved. KD (Ex. 1) 29:15–30:21; SS (Ex. 3) 52:8–23. Response: Admitted in part and denied in part. The grant may was awarded to Mayo by September 30, 1996, given that Dr. Hardy was moving there. See USF 000270. But Dr. Hardy was at USF until at least September 30, 1996. See Ex. 22 at USFX 00013. 3. All mice used at the direction of Duff were bred and assessed at USF. Declaration of Marcia Gordon, Exhibit 8 hereto, Transcript of the deposition of Marcia Gordon (Ex.4), 37:6–23; KD (Ex. 1) 28:12–29:2; 46:14–47:15; 108:8–109:17; and 111:6–21. Response: Admitted in part. The government admits only that the mice studied for the 1998 Paper were bred and assessed at USF facilities. Ex. 5 at 35:9–14. 4. Mice were sectioned and assessed at USF by David Morgan. KD (Ex. 1) 120:24– 121:15; DM (Ex. 5) 68:18–69: 2. Response: Admitted in part. Mice were sectioned and assessed by members of Dr. Morgan’s laboratory, but not necessarily personally by Dr. Morgan. See, e.g., Ex. 5 at 35:15–36:19. 5. The work leading to the first actual reduction to practice of the invention of the ‘094 Patent (Ex. 10) was directed by Karen Duff and done exclusively at USF. KD (Ex. 1) 40:9– 42:13; DM (Ex. 5) 33:8–36:12. Response: Admitted in part. The government admits only that Dr. Duff, as USF’s Rule 30(b)(6) designee, testified that she collaborated with USF personnel (while under the AG14633 grant at Mayo) on the work for the asserted actual reduction to practice reflected in the April 1997 facsimile (Ex. 7 at 8). Ex. 1 at 130:20–131:5. She further testified that USF personnel Dr. Marcia Gordon or her graduate student Leigh Holcomb carried out the work reflected in the Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 9 of 35 5 slides included in the facsimile claimed by USF to document the reduction to practice. Ex. 1 at 105:23–106:3 (identifying Holcomb’s and Gordon’s respective roles at USF), 132:24–133:22 (regarding slide work). 6. The description of the first actual reduction to practice of the invention claimed in the ‘094 Patent (Ex. 10) was described in a facsimile sent by Karen Duff to USF in April, 1997 to alert USF’s patent personnel to the invention. Declaration of William Coppola, Exhibit 7 hereto. Response: Admitted in part. The government acknowledges that USF asserts that the April 1997 facsimile is evidence of USF’s first actual reduction to practice, which is a legal conclusion, for which no response is necessary. Otherwise, the government lacks sufficient information to admit or deny the allegations of this paragraph. 7. At the time of the first actual reduction to practice as described in the facsimile sent to USF by Karen Duff, no NIH grant money had gone to USF. Ex. 1 at 118:24–119:21. Response: Denied. As set forth below in the government’s statement of facts, testimony from Drs. Morgan and Gordon, as well as documentary evidence, strongly support the contention that USF was receiving NIH grant funds (Grant No. AG14633) several months before USF’s alleged actual reduction to practice in April 1997. See infra II.B. 8. U.S. Patent No. 5,898,094 (Ex. 10) is assigned on its face to USF, contains no reference to any grant or funding from any government agency and was prepared by those working at and for USF. KD (Ex. 1) 75:19–76:21. Response: Admitted in part. The government agrees that the ’094 patent on its face contains no reference to any government grants or funding. While the government presumes that the patent Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 10 of 35 6 application(s) leading to the ’094 patent were prepared by those working at or for USF, the government lacks sufficient information to admit or deny those allegations. 9. Hardy applied for funding from NIH and NIA for five (5) related projects calling for research into Alzheimer’s Disease, which application was submitted by USF on September 29, 1995. KD (Ex. 1) 184:22–185:10; MG (Ex. 4) 16:14–17:18; and SS (Ex. 3) 82:19–83:11. Response: Admitted. 10. Project IV of the application for funding specifically describes the cross–breeding of transgenic mice so as to prepare mice that express mutations of a presenilin gene and the APP gene in order to provide mice with accelerated pathology so as to provide an improved mammalian model of Alzheimer’s disease. (Exhibit 6 to the Deposition of Snyder (Ex. 3) (NIH grant AG14633) Ex. 18, p. 327. Response: Admitted in part. Project 4 of the application, which lists Dr. Duff as the Project Leader, is entitled “Transgenic Mouse Models for the Study of the Presenilins.” Ex. 18 at 176 (HHS 512). Aim 3 of Project 4 describes the crossing of PS1 mutant mice developed by the grantees with a transgenic APP mouse. Ex. 18 at 193–94 (HHS00529–30). These described crosses are not those claimed in the patent, as the Swedish mutation is not described. Ex. 1 at 183:7–9. Moreover, the crosses described in Aim 3 (namely crosses using the Athena mouse) were never conducted as part of the grant work. Ex. 18 at 182:2–183:12. 11. Before the grant application submitted by Hardy could be approved by NIH, Hardy transferred from USF, where he was when the application was submitted, to Mayo Clinic, and transferred the grant application with him. DM (Ex. 5) 13:19–14:10; SS (Ex. 3) 52:8–18. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 11 of 35 7 Response: Denied. The grant may was awarded to Mayo by September 30, 1996. See USF 000270. That is, the award was transferred from USF to Mayo by at least September 30, 1996. Hardy was at USF until at least September 30, 1996. See Ex. 22 at USFX 00013. 12. Breeding and assessment of the mice at USF began well prior to the grant of the application as grant number AG14633 (EX. 18). KD (Ex. 1) 117:17–119:21. Response: Admitted in part. The government admits only that Dr. Duff testified, on behalf of USF, that work related to the ’094 patent (including certain mice breeding) occurred before Grant No. AG14633 was awarded in September 1996. Ex. 1 at 137:3–138:19 (discussing breeding efforts in August 1996). The cited Duff testimony does not support that breeding and/or assessment of mice began prior to the grant, however. Id. at 117:17–119:21. 13. When the grant was approved, the funds available in 1996 were released to the Mayo Clinic; USF personnel could not access that money. SS (Ex. 3) 57:1–11; DM (Ex. 5) 86:3– 11. Response: Admitted in part. The government admits only that USF personnel could not directly access the grant funds, Mayo had to provide the funds. See, e.g., Ex. 5 at 86:1–18; Ex. 3 at 57:1– 11. As discussed below, the government believes those funds began flowing to USF no later than the first quarter (January to March) of 1997, and likely within the last quarter of 1996. Ex 5 at 38:3–43:14, 42:12–25. 14. The only way for USF to receive money under grant AG14633 (Ex.18) for work for Project IV of that grant was through a sub-contract between USF and Mayo Clinic. No money could flow directly from NIH to USF. DM (Ex. 5) 38:25–39:22; 41:10–25; SS (Ex. 3) 54: 9–55:14. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 12 of 35 8 Response: Admitted in part. The government admits only that the AG14633 grant funds could not flow directly from NIH to USF. Ex. 3 at 56:2–20. The government lacks sufficient information to admit or deny that a formal written subcontract between USF and the Mayo Clinic was the only way for USF to receive grant funds from Mayo. See, e.g., Ex. 5 at 64:24–65:7 (Dr. Morgan discussing the potential “float[ing]” of Mayo grant funds prior to receipt by USF). 15. No record of such sub-contract exists at NIH, even though any such sub-contract would have had to have been submitted to NIH. SS (Ex. 3) 52:24–54:19. Morgan who would have negotiated the subcontract has no memory of submitting one. DM (Ex. 5) 84:14–16. Response: Denied. The NIH has not located such a subcontract, but it is not clear that any subcontract would have been submitted to NIH. The government’s Rule 30(b)(6) witness, Dr. Snyder, specifically testified that subcontracting matters was generally speaking “sort of a curtain through which I did not have a line of sight.” Ex. 3 at 56:7–10. He further testified that he “could not answer” that the subcontract would be part of the NIH record. Ex. 3 at 57:15–18. Specifically, he stated that “without having the electronic thing here . . . , I would have to doubt that the sub is actually identified anywhere but I can't be certain on that . . . .” Ex. 3 at 57:19–22. Dr. Morgan testified that he had no memory of a “pre-award request” for funds by USF in 1996, and that a subcontract was “not necessarily” in place before USF would spend monies they anticipated receiving from the Mayo Clinic. Ex. 5 at 84:14–85:8. 16. No record of any sub-contract between USF and Mayo Clinic for the period 1996–1997 could be identified in the records of USF. Declaration of Valerie McDevitt, Exhibit 9. Response: Admitted in part. The government acknowledges that USF has not produced any such subcontract (from over 20 years ago) in this litigation and that Ms. McDevitt’s Declaration Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 13 of 35 9 supports the statement in paragraph 16. However, the government lacks sufficient information to admit or deny any other allegations in this paragraph, including the contents of USF’s records. 17. The first time David Morgan applied for funds under the grant through a sub- contract between Mayo Clinic and USF was in November of 1997. If anyone had applied for money under that grant earlier, it would have been referenced in Morgan’s application of November 1997, but no such reference appears. DM (Ex. 5) 89:3–90:8; 92:16–93:10. Response: Denied. Dr. Morgan’s own testimony, along with other evidence cited in this opposition, refutes the allegations of paragraph 17, including notably Dr. Morgan’s statement that the proposition that no grant money flowed to USF prior to the November 1997 date on the cited document was “improbable” as he was “unaware of how [Dr. Gordon] would have been paid other than with funds from this grant.” Ex. 5 at 92:9–25. 18. The invention of the ‘094 Patent (Ex. 10) is described in a Nature Paper from 1998 (Ex. 14) on which Holcomb is the lead author. The description of the invention of the patent in suit was of such importance that the paper was used to support progress in year 2 for other work described in the grant AG14633 (Ex. 18) to Mayo Clinic. SS (Ex. 3) 123:1–124:6. Response: Admitted. The 1998 Nature Paper describes the claimed inventions of the ’094 patent, and the research leading to those claimed inventions and acknowledges that the AG14633 grant supported the work that led to the inventions. B. GOVERNMENT’S STATEMENT OF MATERIAL FACTS Pursuant to RCFC 56(c), the government hereby asserts its statements of undisputed material facts (with supporting citation) in support of its opposition. 1. USF’s First Actual Reduction to Practice 1. USF alleges that the invention(s) of the ’094 patent was actually reduced to practice (and documented) no later than April 25, 1997. See, e.g., Dkt. No. 117 at 11. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 14 of 35 10 2. The alleged April 25, 1997 reduction to practice by is documented in a facsimile from Dr. Duff to William Coppola. Ex. 7 at 6–9. On its face, this communication, labeled “Urgent,” states that “[w]hat we did was cross together one Tg2576 [APPswe] male mouse with three PS1 [mutant] mice (line 5.1).” Id. at 7. These crosses were performed by the USF laboratory group, which included Dr. Gordon. Ex. 1 at 127:17–25. 3. The facsimile contains the copy of an email followed by two slides (Figures 1 and 2), where two brain sections are shown with beta-amyloid deposits.3 Ex. 7 at 6–9. The enclosed email describes how the figures demonstrate “animals carrying two transgenes which show Alzheimer’s type pathology at 5.5 months of age,” whereas “[a]nimals carrying just the APP transgene do not develop [beta-amyloid] deposits in any animals tested” up to 7.5 months of age. Id. at 6. 4. A notation on one slide attached to the facsimile indicates that the work was “performed by D. Morgan at USF, in collaboration.” Ex. 7 at 8. This refers to Dr. David Morgan at USF, whose laboratory was working in collaboration with Dr. Duff. Ex. 1 at 130:20– 131:5. 5. Further, Dr. Duff confirmed that this experimental work detailed in the attached figures to the April 25, 1997 facsimile (e.g., a finding of accelerated Aβ deposition) was conducted at USF, either by Dr. Marcia Gordon or Leigh Holcomb, who was a graduate student supervised by Dr. Gordon. Ex. 1 at 105:9–11; 133:19–23. 3 For this reason, this facsimile is sometimes referred to as an email to Mr. Coppola in the deposition transcripts. See Ex. 1 at 134:5–21. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 15 of 35 11 6. Other than the April 25, 1997 facsimile, USF’s motion asserts no documentation of earlier actual reductions to practice of claimed inventions of the ’094 patent. See Dkt. No. 118. 2. NIH Grant No. AG14633 7. NIH Grant No. AG14633 was ultimately awarded to the Mayo Clinic on September 30, 1996, the last day of the fiscal year. Ex. 3 at 50:8–51:3; Ex. 5 at 14:1–5. 8. As described in the grant application, Project 5 under the grant was entitled “Regulation and Function of the Presenilins in the Rodent Brain” and the Project Leader4 was Dr. David Morgan at USF. Ex. 18 at 204 (HHS 00541); Ex. 5 at 46:11–47:20. 9. As Project Leader, Dr. Morgan was responsible for “all aspects” of the research in Project 5, and for closely directing “all experiments using molecular biological approaches.” Ex. 18 at 208 (HHS 00545). He was also “the individual responsible for the subproject to the University of South Florida from the Mayo Clinic,” and thus determined how grant funds would be spent. Ex. 5 at 40:11–22. 10. Within a couple of months after the AG14633 grant was awarded, USF received grant funds for activities performed under the grant, including pathology and behavioral work reflected in the 1998 Nature Paper. Ex. 5 at 43:5–22. 11. The 1998 Nature Paper describes the double-transgenic mice of the ’094 patent and their capabilities of expressing accelerated pathology of Alzheimer’s disease, particularly accelerated deposition of the AB protein. Ex. 14. 4 He is also referenced in the grant application as the “Principal Investigator” or “P.I.” and “project director” of Project 5. Ex. 18 at 206 (HHS 00543), 208 (HHS 00545). Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 16 of 35 12 12. While not explicitly discussed in the Abstract for Project 5 found in the grant application, Ex. 18 at 205 (HHS 00542), Dr. Morgan’s laboratory ultimately worked with the double transgenic mice under project 5, namely those containing both the APPswe mutation and the M146L mutation. Ex. 5 at 43:15–44:5; 47:16–48:25, 93:23–95:19; Ex. 3 at 38:11–21; Ex. 4 at 17:17–25. 13. Dr. Morgan laboratory’s pathology and behavioral work on these double- transgenic mice, finding inter alia, accelerated beta-amyloid deposition, was ultimately included in the 1998 Nature Paper. Ex. 5 at 45:4–13; 68:18–69:23; 71:20–73:22. 14. Though the 1998 Nature Paper includes a typographical error in referencing the grant as “AG146133,” Ex. 5 at 76:22–77:9, it correctly references that the AG14633 grant supported the work reflected in the Paper as part of the “Mayo/USF Program Project on the presenilins.” Ex. 14 at 5 (acknowledgements). 3. Funds Were Provided Under NIH Grant No. AG14633 to USF and Dr. Duff Prior to Actual Reduction to Practice. 15. By the first quarter of 1997, NIH funds under the AG14633 grant were undoubtedly being used to fund USF research, including pathology work detailed in the 1998 Nature Paper. Ex. 5 at 42:12–25. 16. Accordingly, the first documented actual reduction-to-practice in April 25, 1997 (as alleged by USF, Dkt. No. 117 at 5 (citing Ex. 1 at 126: 3–135:5)) resulted from work conducted by USF personnel under the AG14633 grant. Ex. 5 at 68:20–69:25. 17. Dr. Duff testified that she does not know if her salary at Mayo was being paid by NIH grants at this time, April 1997. Ex. 1 at 123:10–13. Nevertheless, the AG14633 grant application indicates that it was funding a portion of her Mayo salary for her duties as Project Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 17 of 35 13 Leader for Project 4 for initial year of the grant (1996–97). Ex. 18 at 178 (HHS 00514) (proposing funding roughly a quarter of her salary for 25% effort on project). 18. According to USF, Dr. Duff “directed” the work that resulted in the alleged actual reduction to practice. Dkt. No. 118 at 8 (¶ 5) (citations omitted). 4. Further Evidence of USF Funding through the AG14633 Grant a) USF Financial Records 19. USF’s accounting records from the mid-1990s reference Grant Account No. 6113-120-LO, which is associated with funding for Project 5 of the AG14633 grant. Ex. 27 at USF 000275–76; Ex. 5 at 54:24–59:12. 20. Such accounts, including Grant Account No. 6113-120-LO, were used by USF personnel to bill expenses to a particular grant. Ex. 5 at 59:19–60:5; Ex. 28 at USFX 00038. 21. Grant Account No. 6113-120-LO is specifically designated for funding under the AG14633 grant and no other grant. Ex. 27 at 273–76; Ex. 5 at 60:6–9; Ex. 4 at 26:3–28:8. 22. As evidenced by her employment contract, funds from Grant Account No. 6113- 120-LO were used to fund Dr. Marcia Gordon’s salary for the appointment period from October 1, 1996 to June 12, 1997. Ex. 28 at USFX 00038; Ex. 4 at 23:8–25:8. 23. Though some of the signatures on the contract post-date the start of the appointment period, payments started nonetheless at the start of the period. Ex. 4 at 28:9–29:22. 24. The contract specifically states that “THE POSITION DESCRIBED HEREIN IS FUNDED THROUGH CONTRACT/GRANT MAYO CLINIC, ACCOUNT # 6113120L0 AND ALL TERMS AND CONDITIONS OF IT ARE CONTINGENT UPON CONTINUATION OF THAT CONTRACT/GRANT.” Ex. 28 at USFX 00038 (capitalization in original). Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 18 of 35 14 25. Without funds from the AG14633 grant, USF could not have afforded to fund Dr. Gordon’s salary for the 1996–1997 time period. Ex. 5 at 90:16–25, 91:19–92:15; see also id. at 75:9–11 (indicating one hundred percent of salary paid by grant). 26. The first year of a subcontract that Mayo used to fund USF to reduce the invention to practice spanned the period from September 1, 1996 to August 31, 1997 in view of the August 17, 1998 memorandum from Dr. Morgan to USF Grant Specialist Sue Endress, in which he notes that “the second year of the subcontract for NIH grant Account # 6113-127-LO closes August 31, 1998. This is a Mayo Clinic Subcontract Grant from the National Institutes of Health (National Institute for Aging, POI).” Ex. 27 at USF_000267 (emphasis added). b) Dr. Marcia Gordon 27. Dr. Marcia Gordon was an Assistant Professor at USF from 1994 to 2000. Ex. 4 at 12:25–13:5; Ex. 24 at 1 (Gordon’s curriculum vitae). During that period, all of Dr. Gordon’s salary was paid through grants. Ex. 4 at 14:7–21; Ex. 5 at 75:24–76:13. 28. Dr. Gordon’s curriculum vitae includes an entry for the AG14633 grant. Ex. 24 at 2. It specifically references “Project 5,” lists Dr. Gordon as a “Co-Investigator,” and lists the relevant time period as October 1, 1996 to September 30, 1999. Ex. 24 at 2. 29. Dr. Gordon testified that the October 1, 1996 is indicative of her “best understanding of when Project 5 was funded for [her] and everyone else working on it.” Ex. 4 at 18:21–20:17. She further testified that she “definitely was involved in from the time it [Project 5] started until even maybe before it started.” Ex. 4 at 18:16–19. 30. With regard to the research reflected in the 1998 Nature Paper, Dr. Gordon was involved with breeding the double-transgenic mice described, maintaining the mice, and then collecting data from a variety of behavioral and pathological tests she assigned. Ex. 4 at 36:5– Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 19 of 35 15 17. In other words, Dr. Gordon was involved in all of the research in the article with the exception of one table. Ex. 4 at 37:15–22. 31. Much of the day-to-day work in handling the mice was conducted by Leigh Holcomb, Dr. Gordon’s graduate student, but Dr. Gordon was typically involved in placing mice in experiments and evaluating the data. Ex. 4 at 38:21–18. In that vein, a footnote in the 1998 Nature Paper indicates that Ms. Holcomb and Dr. Gordon “contributed equally to this work.” Ex. 14 at 1 (footnote 1). 32. Dr. Gordon, along with Dr. Morgan, left USF in 2017 for their present positions at Michigan State University. Ex. 4 at 13:6–19. c) Progress Report 33. In its application to receive a third year of funding under the AG14633 grant (for the time period from September 1, 1998 to August 31, 1999), Mayo included, as a supporting document, a “Progress Report,” which characterizes the project as continuing to be “very successful and productive and the following publications have arisen from it over the past year.” Ex. 25 at HHS 00701. The Report was drafted by Dr. John Hardy, a named co-inventor for the ’094 patent (along with Dr. Duff). Ex. 5 at 78:5–7. 34. The list of papers in the Progress Report includes the 1998 Nature Paper, which describes the claimed inventions of the ’094 patent. Ex. 25 at HHS 00701. It is identified as Paper 2. Ex. 25 at HHS 00701. 35. Amongst the listed publications, Paper 2 is highlighted in Mayo’s discussion of its successes under the grant. Specifically, the Progress Report states that “[i]n the last year we have documented the interaction between presenilins and APP in cell lines and mice (papers 1 and 2) . . . .” Ex. 25 at HHS 00701. It further notes that “[p]apers 2, 3 and 7 have been in top- flight journals . . . .” Ex. 25 at HHS 00701. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 20 of 35 16 36. As this Progress Report itself indicates, such reports are commonly submitted in renewal applications for multi-year NIH grants because “each year you need to send a progress report . . . so that [the NIH] can see what you have done with the funding that you’ve received up until that time.” Ex. 5 at 77:17–24; see also Ex. 3 at 115:10–22. 37. NIH grants management relied on this Progress Report in deciding to release funds for the third year of the grant. Ex. 3 at 115:23–116:3. III. ARGUMENT A. SUMMARY JUDGMENT STANDARD Summary judgment is appropriate only if “the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In making that determination, a court must view the evidence “in the light most favorable to the opposing party.” Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). “The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A court is not entitled to either weigh the evidence or make credibility determinations. See id. (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . .”). In other words, “[t]he Court’s function is not to weigh the evidence and determine the merits of the case presented, but to determine whether there is a genuine issue of material fact for trial.” Starr Int’l Co. v. United States, 128 Fed. Cl. 20, 21 (2014) (citing Anderson, 477 U.S. at 249). Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 21 of 35 17 B. BAYH-DOLE ACT The Bayh-Dole Act5, 35 U.S.C. §§ 200 et seq., controls patent rights on inventions created under federally supported research. A major objective of the Bayh-Dole Act is “to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions. . . .” 35 U.S.C. § 200. Nonetheless, under the Act and its implementing regulations, 37 C.F.R. §§ 401.1–16, a contractor is permitted to retain title to patented or patentable subject inventions developed under federal funding. Each federal funding agreement requires the contractor to “disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters, and that the Federal Government may receive title to any subject matter not disclosed to it within such time.” 35 U.S.C. § 202(c)(1). Failure to do so could result in a contractor losing title to such patents. See Campbell Plastics Eng’g & Mfg. v. Brownlee, 389 F.3d 1243, 1247 (Fed. Cir. 2004). USF essentially concedes that it did not disclose funding it received in developing the claimed inventions of the ’094 patent, Dkt. No. 118 at 9 (¶ 8). Regardless, the Act guarantees the government the right to a paid-up license to practice “any subject invention” when the contractor elects to retain title. 35 U.S.C. § 202(c)(4); see Campbell Plastics, 389 F.3d at 1247. Specifically, the government receives a nontransferable irrevocable license “to practice and have practiced” each invention for and on behalf “of the United States.” 35 U.S.C. § 202(c)(4). Thus, the government automatically has rights to a paid- 5 The Act is formally known as the Patent and Trademark Law Amendments Act, Pub. L. 96- 517, 94 Stat. 3015 (Dec. 12, 1980). Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 22 of 35 18 up license, which cannot be revoked. See Cent. Admixture Pharm. Servs. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347, 1351 (Fed. Cir. 2007). “The term subject invention means any invention of a contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.” 35 U.S.C. § 201(e) (emphases added). The term “funding agreement,” by statute “means any contract, grant, or cooperative agreement entered into between any Federal agency, other than the Tennessee Valley Authority, and any contractor . . . .” 35 U.S.C. § 201(b). It also “includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as herein defined.” Id. (emphasis added). Thus, these provisions apply to USF as a subgrantee for any “subject invention” arising under a “funding agreement,” such as AG14633. Here, Mayo, the grantee, and USF, the subgrantee, for the grant-at-issue have each failed to properly disclose that the inventions in the ’094 patent were funded by a NIH grant. Nevertheless, the government has not sought title (ownership) of the ’094 patent (which has now expired), only the right to use the claimed inventions under a paid-up license granted by the Act, as a defense to USF’s claims of patent infringement. Contractually, the Bayh-Dole Act operates by requiring federal agencies to use a standard patent rights clause (SPRC) in all funding agreements for research or development work unless an agency can justify an exception. See 37 C.F.R. §§ 401.3, 401.14(a) (1987) (SPRC effective for the first year of AG14633 grant). USF’s motion does not challenge that this clause exists here. See generally Dkt. No. 118. Indeed, the relevant grant award documentation (such as the Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 23 of 35 19 Notice of Award for the second year of the grant)6 indicates that the terms of the grant include the “PHS Grants Policy Statement including addenda in effect as of the beginning date of the budget period.” Ex. 27 at USF 000270 (Box 16). For the first year of the AG14633 (1996–1997), the relevant policy statement was the 1995 Addendum to the 1994 PHS Grants Policy Statement,7 which stated that: “PHS awarding offices and recipients of PHS grants shall be governed by government wide regulations issued by the Department of Commerce at 37 CFR Part 401 for patents and inventions arising out of activities assisted by a PHS grant.” Ex. 30 at 8 (¶ 8–15). The Policy Statement references “the full text” of the SPRC contained in 37 CFR 401.14 . . . .” Ex. 30 at 8 (¶ 8–15). That SPRC specifically provided (as it does now) the government “a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.” 37 C.F.R. § 401.14(a) (1987).8 C. A BAYH-DOLE LICENSE IS AN AFFIRMATIVE DEFENSE TO USFS INFRINGEMENT CLAIMS. USF alleges that, through authorization and consent to activities by The Jackson Laboratory, the government has infringed certain claims of the ’094 patent. Dkt. No. 1 at 1 (¶ 1); Dkt. No. 105 at 1. The relevant statute, 28 U.S.C. § 1498, permits infringement actions against 6 Just as a formal USF grant subcontract for the first year of the grant was not found by USF, Ex. 9, the government is likewise unaware that any Notice of Award for the first year of the grant was produced by USF. 7 The Grants Policy Statement was not amended again until 1998. See https://archives.nih.gov/asites/grants/05-21-2015/archive/grants/policy/policy.htm. 8 Moreover, the produced Sub-Grant agreements signed between Mayo and USF for later grant years further indicate that the government’s rights under the Bayh-Dole Act were preserved. See Ex. 26 at USF 000243 (providing Article 17, which incorporates both the Act itself and the Department of Health and Human Services (HHS) implementing regulations). Such language was required under the applicable Grants Policy Statement. Ex. 30 at 12 (A9-3, ¶ (g)(1)). Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 24 of 35 20 the government where a patented invention “is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same.” (emphasis added). Courts have recognized that government may raise a license under the Bayh-Dole Act “as an affirmative defense . . . for patent infringement in the Court of Federal Claims.” Madey v. Duke Univ., 413 F. Supp. 2d 601, 611 (M.D.N.C. 2006) (citing Technical Dev. Corp. v. United States, 597 F.2d 733, 745–46 (Ct. Cl. 1979); Technitrol, Inc. v. United States, 440 F.2d 1362 (Ct. Cl. 1971)). The government has affirmatively pled this defense. Dkt. No. 17 at 6 (¶ F). Thus, to establish a license under the Bayh-Dole Act, the government must prove (1) that a “funding agreement” exists, namely “any type” of subcontract between Mayo and USF, and (2) that the patented invention(s) of the ’094 patent was conceived or first actually reduced to practice under that funding agreement (or, in other words, were “subject inventions”). See Madey, 413 F. Supp. 2d at 613. Given that USF argues that its first actual reduction to practice was first documented in April 1997, an allegation that the government does not contest for purposes of this motion,9 the principal issue raised by USF’s motion is the existence of a USF subcontract at that time. D. USF IMPROPERLY REQUIRES PROOF OF A BAYH-DOLE LICENSE BY A FORMAL SUBCONTRACT. Rather than evaluate all evidence regarding the funding of USF’s efforts to develop (and actually reduce to practice) the inventions of the ’094 patent by the AG14633 grant, USF’s arguments rely entirely on the failure to locate a formal subcontract between USF and the Mayo Clinic for the relevant time period, from late 1996 to April 1997 (when USF alleges the actual 9 The government is not conceding that USF’s actual reduction to practice occurred as early as April 1997, but for purposes of this motion, is arguing that strong evidence exists that USF received AG14633 grant funds prior to April 1997 or any other later actual-reduction-to-practice date that may be established—thereby creating numerous issues of fact. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 25 of 35 21 reduction to practice occurred (Ex. 7)). See, e.g., Dkt. No. 118 at 14–15. USF specifically notes that a copy of such a document has not been found in USF’s files,10 Dkt. No. 118 at 15 (citing Ex. 9), or NIH’s files, Dkt. No. 118 at 15.11 USF thus concludes that in the absence of an express written subcontract document between USF and Mayo, “no license under 35 U.S.C. § 202 can arise in favor of the United States.” Dkt. No. 118 at 5. But these arguments reflect a fundamental misunderstanding of the law. Under the Bayh- Dole Act, a “funding agreement . . . includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement . . . .” 35 U.S.C. § 201(b) (emphasis added). Thus, there is no statutory requirement to prove the existence of a written subcontract, or more specifically, the particular formal written contract that USF presupposes must exist. Dkt. No. 118 at 10 (¶¶ 14–16). In addition to written contracts, other “types” of subcontracts would include (1) express oral contracts, (2) contracts implied in fact (inferred from the conduct of the parties), and (3) contracts implied in law (quasi-contracts). Richard A. Lord, Williston on Contracts §§ 1.5, 1.6 (4th ed. 1990). Thus, work under any of these types of subcontracts between Mayo and USF would be sufficient to establish a government Bayh-Dole license. 10 USF makes a similar argument about Dr. Morgan’s testimony the lack of a USF accounting document in a USF file containing forms for funding prior to November 1997 (Dkt. No. 118 at 10–11, 14), while ignoring all of Dr. Morgan’s testimony that USF received AG14633 funds during the first year of the grant. Most notably, Dr. Morgan rejected the proposition that no grant money flowed to USF prior to the November 1997 date on the cited accounting document was “improbable” as he was “unaware of how [Dr. Gordon] would have been paid other than with funds from this grant.” Ex. 5 at 92:9–25. 11 But contrary to USF’s contentions, the government’s Rule 30(b)(6) witness never stated that NIH would have possessed a copy of such a subcontract. Ex. 3 at 57:15–18. He, in fact, stated, that he “could not answer” that the subcontract would be part of the NIH record, and further doubted that the subgrantee (USF) was identified anywhere in the NIH record. Id. at 57:15–29. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 26 of 35 22 Even if a formal subcontract were required, USF presumes that a copy of that contract must be provided to prove its existence. It is a longstanding tenet of contract law that lost or missing contracts can be established and enforced in court, provided that their substance is “proved satisfactorily.” Tayloe v. Riggs, 26 U.S. 591, 600 (1828). Courts have generally interpreted this to be a “clear and convincing” legal standard, requiring parol (oral) or documentary evidence from credible sources. See, e.g., Alph C. Kaufman, Inc. v. Cornerstone Indus. Corp., 540 S.W.3d 803, 812–13 (Ky. App. 2017) (citations omitted). Based on its flawed legal premises, USF improperly concludes that “[t]here is, quite simply, no funding agreement that existed between USF and either the United States or a United States-funded party with a subcontract in favor of USF, such as the Mayo Clinic, during the time running from the conception of the claimed invention to its first actual reduction to practice.” Dkt. No. 118 at 13. In fact, when reviewed under the proper legal standards, there is strong evidence establishing that a subcontract of some type existed between USF and Mayo during the first year of the AG14633 grant, when the inventions of the ’094 patent were developed and, according to USF, first actually reduced to practice. E. DR. MORGAN TESTIFIED THAT THE AG14633 GRANT FUNDED USF WORK LEADING TO THE INVENTIONS CLAIMED IN THE ’094 PATENT. Specifically, USF’s motion ignores the vast amount of evidence that shows that funds under the AG14633 grant flowed to USF from the grantee Mayo, shortly after the grant was awarded to Mayo on September 30, 1996.12 Most notably, Dr. David Morgan, the Project Leader of Project 5 of the AG14633 grant, unequivocally and repeatedly testified that his USF 12 The government does not challenge USF’s argument that AG14633 funds would have initially flowed to Mayo, Dkt. No. 118 at 14, but rather disputes USF contentions that (1) no funds flowed to USF during the relevant time period, and (2) that no “subcontract” agreement between Mayo and USF has been established in the record. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 27 of 35 23 laboratory bred and tested double-transgenic mice described in the ’094 patent—with the Swedish mutation (APPswe) and M146L presenilin mutation—using funds from the AG14633 grant, within a couple of months after it was awarded in September 1996. See, e.g., Ex. 5 at 38:3–43:14. While double-transgenic mice were not described initially as part of Project 5, it ultimately became part of that effort as being consistent with its goals, and was therefore funded by the grant. Ex. 5 at 43:15–45:13. USF’s grant-funded work included the pathology and behavioral work published in the 1998 Nature Paper, the follow-on article for the ’094 patent. Dr. Morgan testified that pathology work for the 1998 Nature Paper was being conducted during the first quarter of 1997 (i.e., January through March) and that there was no doubt that such work was being funded by the AG 14633 grant by that time: Q. . . . going back to the paper figures one and two, the [1998 Nature] paper we were looking at, Exhibit 4, is there any doubt based on the dates of things that NIH funded the research that led to that data in figures one or two? A. No, I believe that we collected these data probably in the first quarter of 1997. Q. Okay. A. That’s my recollection. And these mice were around six months of age if I recall. Q. Were there NIH funds by that point in time? A. Yes, there was. Q. There’s no doubt about that? A. There’s no doubt about that. Ex. 5 at 42:12–25 (emphasis added). Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 28 of 35 24 F. THE NIH-FUNDED USF WORK INCLUDED THE ALLEGED ACTUAL REDUCTION TO PRACTICE IN APRIL 1997. Consistent with this testimony, Dr. Morgan also made clear that USF’s alleged first actual reduction-to-practice involved USF research funded by the AG14633 grant. This alleged reduction to practice relates to the facsimile to William Coppola that is provided on pages 6–9 of Exhibit 7. The facsimile contains the copy of an email followed by two slides (Figures 1 and 2), where two brain sections are shown with beta-amyloid deposits. Ex. 7 at 6–9. The enclosed email describes how the figures demonstrate “animals carrying two transgenes which show Alzheimer’s type pathology at 5.5 months of age,” whereas “[a]nimals carrying just the APP transgene do not develop [beta-amyloid] deposits in any animals tested” up to 7.5 months of age. Ex. 7 at 6. Dr. Morgan confirmed that these pathology experiments were conducted in his laboratory using AG14633 grant funds13: Q. Okay. Looking at the date of the e-mail which is I believe April 25th, 1997, and in looking at the written comment on figure one which states in the work performed by D. Morgan of USF in collaboration. Do you see that? A. Yes. Q. Do you have an idea who did these actual experiments reflected in figure one and the figure on the last page? A. It would have been people who are in my laboratory. Q. Okay. And based on the time period do you know if this research was conducted under an NIH grant? A. There were certainly at that time funding from the Mayo project at the time that this was being done, yes. 13 Though USF does not admit that Dr. Morgan’s laboratory was funded as part of the alleged reduction-to-practice experiments, it does concede that Dr. Duff at Mayo (who was already receiving funds) directed this research. Dkt. No. 118 at 2, 8, 13. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 29 of 35 25 Q. Do you think those funds would have been used for these types of experiments? A. Yes, I think that would be true. Q. Do you think it would be used for this experiment specifically? A. I don’t have the records to specify that but that would certainly be an assumption that I would make, yes. Q. Based on all the reasons you just stated? A. Yes. This was consistent with the overall aims of that grant and that would have been an appropriate use of those funds. Q. Does this testing have any relationship to what we saw in terms of the research in the 1998 Nature Medicine Article? A. Yes, these were probably some of the same mice that were represented in that [1998] Nature Medicine Article. Ex. 5 at 68:20–69:25. Thus, Dr. Morgan testified that the AG14633 grant specifically funded the actual reduction to practice alleged by USF, thus funding the “subject invention(s)” of the ’094 patent.14 As USF points out, Dr. Morgan did testify that he did presume a written subcontract should have been executed between USF and Mayo before the grant funds could move to USF. Dkt. No. 118 at 10 (¶ 14) (citing Ex. 5 at 38:25–39:22, 41:10–25). But, contrary to USF’s conclusions that no such agreement was executed, Dr. Morgan was also “quite certain that within a couple of months [after the grant was awarded in September 1996] we got funds from the subcontract.” Ex. 5 at 43:10–11. 14 While USF claims that its conception occurred in 1995, Dkt. No. 118 at 7, the government believes that USF cannot corroborate or otherwise legally establish a conception date prior to 1996. Thus, the government does not concede that the AG14633 grant did not fund the conception of the invention(s) of the ’094 patent. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 30 of 35 26 Though he did not specifically recall seeing a written subcontract for this first year of the grant, he testified “it should have been quite similar to some of the documents that we see for years two and three of the award.” Id. at 93:5–7. This position is supported by an August 17, 1998 memorandum from Dr. Morgan to USF Grant Specialist Sue Endress, in which he notes that “the second year of the subcontract for NIH grant Account # 6113-127-LO closes August 31, 1998. This is a Mayo Clinic Subcontract Grant from the National Institutes of Health (National Institute for Aging, POI).” Ex. 27 at USF_000267. This means that there was a first year of the subcontract in which NIH grant money was paid by Mayo to USF, spanning the period from September 1996 to August 1997. G. USF’S FINANCIAL RECORDS INDICATE NIH GRANT FUNDS FLOWED TO USF DURING THE RELEVANT TIME PERIOD. Dr. Morgan’s testimony alone is sufficient to establish material issues of fact related to USF’s motion, and its assertions regarding the lack of a USF subcontract. Nevertheless, his testimony is strongly corroborated by numerous documents and additional deposition testimony, demonstrating that the overwhelming weight of the evidence supports the government’s contentions (1) that the AG14633 grant funded USF’s development efforts leading to the inventions of the ’094 patent, and accordingly, (2) that it is licensed to the ’094 patent. USF accounting records reference Grant Account No. 6113-120-LO as being specifically associated with funding for Project 5 of the AG14633 grant. Ex. 27 at USF 000275–76; Ex. 5 at 54:24–59:12. Like other such accounts, which were used to bill expenses to a particular grant, Account No. 6113-120-LO is specifically designated for funding under the AG14633 grant. Ex. 27 at 273–76; Ex. 5 at 59:19–60:9; Ex. 4 at 26:3–28:8. This same account was used to fund Dr. Marcia Gordon’s salary for the appointment period from October 1, 1996 to June 12, 1997. Ex. 28 at USFX00038; Ex. 4 at 23:8–25:8. In Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 31 of 35 27 fact, her employment contract specifically states that her position “IS FUNDED THROUGH CONTRACT/GRANT MAYO CLINIC, ACCOUNT # 6113120L0 AND ALL TERMS AND CONDITIONS OF IT ARE CONTINGENT UPON CONTINUATION OF” the AG14633 grant. Ex. 28 at USFX 00038 (capitalization in original document). This documentation supports Dr. Morgan’s contention that, without funds from the AG14633 grant, USF could not have afforded to fund Dr. Gordon’s salary during this time. Ex. 5 at 90:16–25, 91:19–92:15. USF’s Rule 30(b)(6) witness, Dr. Duff, confirmed that either Dr. Gordon or her graduate student Leigh Holcomb’s conducted the beta-amyloid deposition experiments reflected in the April 25, 1997 facsimile. Ex. 1 at 105:9–11; 133:19–23 (discussing Exhibit 7 at 6–9). Accordingly, Dr. Gordon’s employment contract itself establishes that the AG14633 grant funded the actual reduction to practice of the inventions of the ’094 patent, as alleged by USF. H. DR. GORDON’S TESTIMONY AND CURRICULUM VITAE ALSO EVIDENCE THAT USF RECEIVED NIH GRANT FUNDS PRIOR TO THE ACTUAL REDUCTION TO PRACTICE. Furthermore, Dr. Gordon’s curriculum vitae indicates her involvement under the AG14633 grant. A specific entry on the grant specifically references “Project 5,” and lists the relevant time period as October 1, 1996 to September 30, 1999. Ex. 24 at 2. Dr. Gordon testified that the October 1, 1996 is indicative of her “best understanding of when Project 5 was funded for [her] and everyone else working on it.” Ex. 4 at 18:21–20:17. She further testified that she “definitely was involved in from the time it [Project 5] started until even maybe before it started.” Ex. 4 at 18:16–19. I. THE 1998 NATURE PAPER WAS TOUTED AS A GRANT ACHIEVEMENT TO RECEIVE ADDITIONAL AG14633 FUNDS, BUT NOW USF DENIES THAT AN NIH GRANT FUNDED THE SAME WORK IN THE ’094 PATENT. USF concedes that the 1998 Nature Paper describes “the invention of the ’094 patent” and that this invention “was of such importance that the paper was used to support progress for Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 32 of 35 28 other work described in the grant.” Dkt. No. 118 at 11 (citations omitted). But USF stops short of admitting that the AG14633 grant funded this inventive work, despite the fact that the grant is specifically listed in the acknowledgments section as supporting that work. Ex. 14 at 5 (acknowledgements). Further evidence of support of USF work through the AG14633 grant is found in the Progress Report itself. Specifically, the Report clearly references USF-funded work (which constitutes the vast majority of work in the paper itself) by stating that the 1998 Nature Paper (paper 2) documents “the interaction between presenilins and APP in cell lines and mice . . . .” Ex. 25 at HHS 00701. Reports of this type are commonly submitted for multi-year NIH grants so that NIH can review the grantee’s work with the funds that have already been received. Ex. 5 at 77:17–24; Ex. 3 at 115:10–22. And NIH relies on such reports in deciding to release additional funds. Ex. 3 at 115:10–116:3. Thus, the Report clearly shows that, while the 1998 Nature Paper was touted as a grant achievement in order to receive additional grant funds for Mayo and in turn USF, USF refuses to admit that any grant funds led to the inventions of the ’904 patent, when the government’s patent rights under the Bayh-Dole Act are considered. These positions mirror those throughout USF’s motion in ignoring the vast evidence of NIH funding of the patented inventions at issue, and instead focusing on the absence of a written subcontract, which (if it ever existed) the NIH may never have possessed. J. THE EVIDENCE OF RECORD CLEARLY SHOWS THAT A SUBCONTRACT EXISTED BETWEEN USF AND MAYO. Indeed, when all the evidence is considered, it indicates that a subcontract of some type was in place between Mayo and USF well prior to the first actual reduction to practice alleged by USF to be documented in April 1997. Even if no written contract existed, as Dr. Morgan believes, these documents indicate a course of conduct that would create a contract implied in Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 33 of 35 29 law. An implied-in-law contract “founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.” See Balt. & Ohio R.R. Co. v. United States, 261 U.S. 592, 597 (1923) (citations omitted). Given how this grant was moved to Mayo from USF (after Dr. Hardy move to Mayo from USF), the parties clearly intended to move some AG14633 grant funds from Mayo back to USF to support ongoing efforts.15 If USF received funds from Mayo, a subcontract with the required Bayh-Dole provisions should be inferred. Alternatively, this evidence of record could be grounds to find a contract implied in law, regardless whether USF and Mayo intended to enter into a subcontract. For an implied-in-law contract, “a duty is imposed by operation of law without regard to the intent of the parties.” Nitol v. United States, 7 Cl. Ct. 405, 415 (1985). The notion of this “quasi-contract” is the imputing of a promise “to perform a legal duty, as to repay money obtained by fraud or duress.” Under 35 U.S.C. § 201(b), it is clear that the provisions of the Bayh-Dole Act apply to subcontractors and contractors if subject inventions arise under a “funding agreement.” Given that the Bayh-Dole mandates that the government receive an irrevocable license to subject inventions under 35 U.S.C. 202(c)(4), the Court may impose an implied-in-law contract to enforce this legal obligation. IV. CONCLUSION For the reasons stated, the Court should deny USF’s motion as, at a minimum, raising numerous material issues of fact regarding whether some type of subcontract was in place 15 USF concedes this point, only debating as to when a formal written contract was put in place. See Dkt. No. 118 at 15. Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 34 of 35 30 between the Mayo Clinic and USF during USF’s development of the patent inventions of the ’094 patent, including its alleged actual reduction to practice in April 1997. The overwhelming weight of the evidence, in fact, supports the government’s position that a subcontract existed between USF and Mayo under the AG14633 grant and that the government has an irrevocable license in the ’094 patent. Respectfully submitted, JOSEPH H. HUNT Assistant Attorney General GARY L. HAUSKEN Director s/Walter W. Brown WALTER W. BROWN Senior Litigation Counsel Commercial Litigation Branch Civil Division Department of Justice Washington, D.C. 20530 walter.brown2@usdoj.gov Telephone: (202) 307-0341 Facsimile: (202) 307-0345 February 15, 2019 Attorneys for the United States Case 1:15-cv-01549-PEC Document 131 Filed 02/15/19 Page 35 of 35