UNIVERSITY OF SOUTH FLORIDA BOARD OF TRUSTEES v. USAREPLY to Response to Motion re MOTION for Partial Summary Judgment The United States Does Not Enjoy a License under the '094 PatentFed. Cl.March 15, 2019THE 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 Campbell-Smith USF REPLY TO THE OPPOSITION OF THE UNITED STATES TO USF’S MOTION FOR PARTIAL SUMMARY JUDGMENT – NO LICENSE The Government argues it is entitled to a license under U. S. Patent 5,898,094 (hereinafter “the ‘094 Patent”) pursuant to the provisions of 35 U.S.C. §202. The license the Government maintains it enjoys arises from 35 U.S.C. 202 (c) which addresses rights in “any subject invention.” Section C provides that despite the decision of a non-profit organization like the University of South Florida (hereinafter “USF”) to retain rights in “any subject invention” the Federal Government retains a license to the “subject invention.” The term “subject invention” is defined by statute – 35 U.S.C. §201(e): (e)The term “subject invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement…(emphasis supplied). For a license to exist in favor of the Government pursuant to 35 U.S.C. 202, there MUST be a funding agreement between the party that made the invention, USF, Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 1 of 13 2 and the United States before the invention is first reduced to practice. While the funding agreement, pursuant to 35 U.S.C. § 201, may include “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” there must absolutely be a funding agreement of some sort between USF and the United States or its grantee providing for the work that resulted in the invention(s) disclosed and claimed in the’094 Patent for the United States to enjoy a license thereunder. The Courts have emphasized the requirement of a funding agreement. Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. 563 U.S. 776, 782 (2011): In 1980, Congress passed the Bayh–Dole Act to “promote the utilization of inventions arising from federally supported research,” “promote collaboration between commercial concerns and nonprofit organizations,” and “ensure that the Government obtains sufficient rights in federally supported inventions.” 35 U.S.C. § 200. To achieve these aims, the Act allocates rights in federally funded “subject invention[s]” between the Federal Government and federal contractors (“any person, small business firm, or nonprofit organization that is a party to a funding agreement”). §§ 201(e), (c), 202(a). (Emphasis added) See also Campbell Plastics Engineering & Mfg., Inc. v. Brownlee, 389 F.3d 1243, 1247 (Fed. Cir. 2004). For purposes of the Act, Congress has termed these inventions “subject inventions.” See 35 U.S.C. § 201(d)-(e) (1988) (defining an “invention” to mean “any invention or discovery that is or may be patentable,” and “subject invention” to mean “any invention of the Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 2 of 13 3 contractor conceived or first actually reduced to practice in the performance of work under a funding agreement”). (Emphasis supplied) In its Opposition to USF’s Motion for Partial Summary Judgment that the United States enjoys no license, the Government does not point to any actual agreement of any kind between USF and the United States, or any subcontract between USF and any party receiving funds from the United States Government, prior to the first actual reduction to practice by the ‘094 inventors which occurred no later than April, 1997.1 In fact, the United States’ Opposition Brief demonstrates that the first actual funding agreement in favor of USF directed to this technology came into existence in November of 1997, months after that first actual reduction to practice. As a matter of law, the United States is not entitled to a license. I. THERE IS NO FUNDING AGREEMENT The Government appears to acknowledge that there is no record of any kind of an agreement that would provide funding from the United States to USF for the invention claimed in the ‘094 Patent, but nonetheless argues that one must exist. There is no evidence of this, only a 20-year old recollection from David Morgan 1 As shown below, the Government’s speculation that there might have been some sort of implied or oral agreement between USF and Mayo is not only unsupported, but runs contrary to the specific rules and regulations imposed by USF whenever funding under a grant is sought. That very specific policy demonstrates that no funding was available to USF from the government grant until the subcontract was signed in November, 1997 Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 3 of 13 4 that there must have been money to support his wife’s work on the subject matter of the ‘094 Patent (principally, breeding and typing mice). See the Opposition, page 7. In fact, the records relied upon by the Government confirm that no money flowed to USF under the grant in question – AG14633, until November, 1997 – well after the first actual reduction to practice. The primary requirement for a license under 35 U.S.C. §202 remains the presence of a funding agreement. While the Government suggests, page 7 and pages 21–22, that in this case, the “funding agreement” – in the form of a subcontract from Mayo Clinic to USF, may be entirely implied and oral, the opposition brief points to no caselaw that supports this notion, USF is aware of none, and it flies in the face of the cases cited above, as well as the very requirements of the statute itself. The statute makes clear that the “funding agreement” must specify, in addition to the funding to be provided, the elements of 35 U.S.C. §202(c)(1) – (8), including the requirement of disclosure, the requirement that the contractor (theoretically USF in the government’s argument) make a written election, the requirement to file a patent application, the requirement of a license, the requirement of periodic reporting, the inclusion of a statement specifying the governments rights, a requirement that royalties be shared, and the very specific provisions of 35 U.S.C. §§203 and 204 involving “march in” rights and preference for United States industry. All of these terms are explicitly required by the statute. Is the Government seriously suggesting that all Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 4 of 13 5 these specific provisions were somehow reflected in an oral contract that USF and Mayo Clinic – the funded party, agreed upon? If so, the Court must reject that suggestion out of hand. The idea that somehow Mayo and USF reached an oral agreement of this complexity and requiring a written response even though the contract itself is not in writing is a non-starter. In Ciba Geigy v. Alza Corporation, 804 F.Supp. 614, 628 (D. NJ 1992), for example, the Court rejected the argument that an agreement that did not reflect the express provisions of 35 U.S.C. §202(c) could somehow invoke the provisions of 35 U.S.C. §§ 202–204. So many provisions of the requirements of 35 U.S.C. §202 require responses in writing that it is unreasonable to conclude, without some type of statute, caselaw or argument, that the “funding agreement” the Government postulates existed was in fact in place before April 25, 1997. It is, in any event, unnecessary to speculate. The necessary subcontract between USF and Mayo Clinic did in fact exist – executed by the parties and effective November 8, 1997, more than six months after the first actual reduction to practice by USF as reflected in the Deposition of Karen Duff and the Declaration of William Coppola with Ex. 1 thereto. See Ex. 26 offered by the Government, a “Consortium Agreement” between USF and Mayo Clinic that specifically provides for USF to receive money from Mayo to fund projects of Grant AG14633. See Page 2 of Ex. 26. While inventions made with funds received by USF under grant Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 5 of 13 6 AG14633 after the Consortium Agreement that is Ex. 26 came into existence would be subject to the license the government references under 35 U.S.C. §202, such inventions would have had to have been made (conceived or first actually reduced to practice) after the date of the Agreement, which is November of 1997. 2 The existence of the Consortium Agreement, which does not refer to any predecessor agreement of any kind, does not reference any prior payments by Mayo to USF, and does not reflect any such payments, compels the conclusion that no such earlier agreement, oral, implied or written, ever existed. Quite simply, one hundred percent of the evidence advanced by both USF and the Government on this issue underscores the fact that no funding agreement between USF and either Mayo Clinic, to whom the money under Grant AG14633 flowed, or the NIH, existed as of the first actual reduction to practice of the ‘094 Patent on April 25, 1997. In the absence of such a funding agreement, no license to the government can flow under 35 U.S.C. §202. 2 The Consortium Agreement itself indicates that it covers performance running from September 1, 1997 through August 31, 1998, Article 6. Even if payment by Mayo was made to USF for work performed beginning September 1, 1997, that is much too late to give rise to a license under the ‘094 Patent in favor of the government. Payment must occur before the first actual reduction to practice of the invention, which the government concedes occurred no later than the date of Ex. 7, April 25, 1997. See the Opposition – page 5. SOMF 6. Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 6 of 13 7 II. MORGAN’S TESTIMONY DOES NOT SUPPORT THE GOVERNMENT’S POSITION The Government relies on the testimony of David Morgan, (Ex. 5) a professor who left USF in 2018 because his influence and responsibilities had been diminished, Ex. 5. p. 96:3 – 97:18. While the Government relies on Morgan’s recollection of when there might have been money available not to him but his wife, Marcia Gordon3, under the Grant AG14633, in fact the entirety of his testimony underscores the fact that such money did not become available until November, 1997. Ex. 7 to the Morgan Deposition is the document generated by USF at the time (1997) to support a request for funding under AG14633. It is in fact an “underwrite request” – a request to receive funding, based on a commitment those funds will be available shortly. Morgan, Ex. 5 to this Motion, 81:3-25. Importantly, the date for the very first underwriting request under the subcontract specific to AG14633, a request made by Morgan – is August 29, 1997, a date well after the first actual reduction to practice of the invention of the ‘094 Patent. Morgan did not remember writing a request for funding before the request of August 29, 1997.4 Ex. 5, 84:14–16. We do not need to rely on memories of events 3 Marcia Gordon was also deposed by the Government, Ex. 4, but could not remember receiving funding under AG14633. Ex. 4, 59:12 – 63:9. 4 Remember that the subcontract between Mayo and USF covers performance from September 1, 1997 to August 29, 1998. It is therefore logical and consistent that Morgan, knowing performance would be covered beginning September 1, 1997 Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 7 of 13 8 that took place twenty years in the past, however. Morgan testified that his underwrite request showed on its face that it was approved on November 8, 1997, which is the date USF would have received confirmation from Mayo Clinic that they would honor the subcontract. Ex. 5, 89:8–23. It is no coincidence that the date of November 8, 1997 is the date the sub-contract (Consortium Agreement) was signed. Ex. 26, p. 7. Critically, Morgan testified that if he had requested funds under AG14633 earlier, that request would have been reflected in the underwriting request that is Morgan Ex. 7. Morgan, Ex. 5 to this Motion, 89:24 – 90:11. No such reference exists because the subcontract (Consortium Agreement) did not come into existence until November, 1997. Morgan did not testify that he in fact remembered receiving any funds under the subcontract for AG14633 before November of 1997; he simply testified that they (USF) should have received funds in that timeframe. Ex. 5, 43:3–22. Much of the Government’s argument is pinned to the fact that Morgan’s wife, Marcia Gordon, worked in an almost daily fashion on breeding and typing the mice that would become the subject of the ‘094 Patent. See the Opposition, pp. 26–28. The facts support the contrary conclusion – Gordon’s payment could not have come from a hypothetical subcontract from Mayo to USF. Gordon’s work began well prior to the date funds would have been made available to USF under this would submit his first request for funding under AG14633 the day before. (August 29 was a Friday). Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 8 of 13 9 hypothetical subcontract, as her work began well before the date of the Grant itself. Gordon herself testified that she was involved in the doubly transgenic mouse project from a time before the award of AG14633. Ex. 4, 18:12–19. Gordon testified that the work she had done began well before Grant AG14633 was awarded. Ex. 4 (Gordon) 60:7–19. Gordon specifically testified that her work might have been funded by any number of grants other than AG14633 where she was an employee, not an investigator. Ex. 4, 60:20 – 63:9. Gordon could not remember which grant funded her before the subcontract (Consortium Agreement) kicked in in November, 1997. There is a simple, straightforward explanation that comports with the facts. Marcia Gordon began work on the mice that led to the ‘094 Patent well before grant AG14633 was ever awarded. She was being paid out of other grants while she did that work. When the Consortium Agreement was finally signed in November of 1997, the “account” out of which Gordon was paid was changed, to track the new subcontract. Ex. 4, 64:15 – 65:10. David Morgan never requested funds under AG14633 until he had an expectation that there would be a subcontract between Mayo and USF. Morgan’s request for underwriting pursuant to that grant is dated August 29, 1997, the day before performance under the subcontract for AG14633 would be covered, and was granted November 8, 1997, the date the subcontract came into existence. Morgan’s request for underwriting would have referenced an earlier request had one been submitted, but it did not Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 9 of 13 10 because no one at USF requested money under the grant until the subcontract came into existence. There is no shred of evidence, no writing, no clear memory, no conversation, no individual that actually recalls a subcontract under AG14633 in favor of USF until November 8, 2017. Had such a subcontract existed earlier, the University’s practices would have reflected its existence earlier. They do not. Morgan’s request for underwriting would have referenced any earlier request. It did not. If such a subcontract existed, NIH would have had a record. It does not. The only explanation that is consistent with the facts both parties recognize is that AG14633 was awarded to the Mayo Clinic in late 1996, but no subcontract thereunder with USF, the ONLY source of Government/Mayo Clinic funding for USF for that project, existed until November 8, 1997. As David Morgan testified, University practices at the time required the existence of a written grant or contract before funds could be advanced to do work under that funding agreement. Such a request is reflected in Ex. 7 to the Morgan deposition, discussed at length at Ex. 5, 54:18 – 65:7. There was simply no possibility that an oral agreement or implied contract or something other than a written document would be the basis for providing the funding requested in a document like Morgan Ex. 7. This is made dramatically clear by the fact that the underwrite request submitted by Morgan tracks the dates of performance of the subcontract, and was not approved until the subcontract was executed on Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 10 of 13 11 November 8, 1997. Since the funding for USF under AG14633 could not have been received until the Funding Agreement that is Ex. 26 was adopted in November of 1997, the invention of the ‘094 Patent, actually reduced to practice no later than April 25, 1997 cannot give rise to a license to the government under that patent pursuant to 35 U.S.C. §02. III. CONCLUSION The Government asserts it is entitled to a license pursuant to 35 U.S.C. §202. That statute requires the existence of a funding agreement that must reflect the very specific elements set forth in the Statute (see, in particular, 35 U.S.C. §202(c)(1) – (8). The Government concedes that no such funding agreement exists but insists it could have been implied. There is neither case law nor theory nor witness to support the existence of such a funding agreement. Plus, it would be contrary to USF’s policy and practice to accept grant money other than under a written funding agreement, which is exactly what USF eventually did. Specifically, there IS written evidence that the subcontract that conveyed money to USF from Mayo Clinic for performance under AG14633 came into existence November 8, 1997. Ex. 26, the subcontract itself, is dated November 8, 1997. Had Morgan ever requested funding under AG14633 in advance of his first underwriting request made in September of 1997 and approved in November of that year, it is Morgan’s own testimony that his underwriting request would have had to reflect an earlier funding request – but no such request exists, and is not Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 11 of 13 12 referenced on the request granted November 8, 1997. No “funding agreement” as called for by statute existed as of April 25, 1997 The invention of the ‘094 Patent was first actually reduced to practice no later than April 25, 1997 – six (6) months in advance of the existence of the subcontract between Mayo and USF. The license the Government asserts it is entitled to is confined to inventions conceived or first actually reduced to practice after funding under the Government’s grant begins. Mayo did receive a grant, AG14633. USF did not receive funding for the ‘094 Patent invention through the subcontract that is Ex. 26. The invention at issue was made well in advance of any funding received by USF, and well in advance of any funding agreement as required by statute. USF moves for entry of partial summary judgment that the Government is not entitled to a license under the ‘094 Patent by reason of 35 U.S.C. §202. Dated: March 15, 2019 OF COUNSEL: Jerry Stouck Email: stouckj@gtlaw.com GREENBERG & TRAURIG 2101 L Street, N.W., Suite 1000 Washington, DC 20037 (202) 331-3173 phone (202) 261-4751 facsimile s/Steven B. Kelber Steven B. Kelber Email: steve@kelberlawgroup.com THE KELBER LAW GROUP 1875 Eye Street, N.W., Fifth Floor Washington, D.C. 20006 240-506-6702-Telephone Counsel for Plaintiff University of South Florida, Board of Trustees Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 12 of 13 13 Case 1:15-cv-01549-PEC Document 136 Filed 03/15/19 Page 13 of 13