Shaw v. Regents of University of California

Decision Date02 October 1997
Docket NumberNo. 3,3
Citation58 Cal.App.4th 44,67 Cal.Rptr.2d 850
Parties, 121 Ed. Law Rep. 261, 97 Cal. Daily Op. Serv. 7835, 97 Daily Journal D.A.R. 12,550 Douglas V. SHAW, Plaintiff and Respondent, v. The REGENTS OF THE UNIVERSITY OF CALIFORNIA, Defendant and Appellant. Civ. 21828.
CourtCalifornia Court of Appeals Court of Appeals

P. Martin Simpson, Jr., James E. Holst, John F. Lundberg, Arnold, White & Durkee, Alameda, Gerald P. Dodson, James F. Valentine, Melno Park, for Defendant and Appellant.

Miller, Starr & Regalia, Marvin B. Starr, Walnut Creek, and Lynne M. Yerkes, Redwood City, for Plaintiff and Respondent.

SCOTLAND, Associate Justice.

This case involves a dispute over a policy of the Regents of the University of California (the University) which provides that, as a condition of employment by the University, an employee must assign to the University any of the employee's inventions and patents conceived in the course of employment; as consideration for the assignment, the employee will get a percentage of those net royalties and fees received by the University for a patented invention.

When Associate Professor Douglas V. Shaw was hired by the University to teach and do research, the patent policy specified that employees would get 50 percent of the net royalties and fees received from their inventions. The University later revised the policy to reduce this percentage. When the University announced it would pay Shaw the reduced percentage for his patented inventions conceived after the policy change, Shaw brought this action, seeking a declaration that he is entitled to 50 percent of the net royalties and fees.

The University appeals from the judgment entered in Shaw's favor following an order granting summary judgment on his complaint for declaratory relief. According to the University, the patent policy in effect at the time Shaw was hired was not part of the patent agreement signed by Shaw as a condition of his employment; rather, it is a personnel policy that the University may modify unilaterally at any time.

We shall affirm the judgment. As we shall explain, the patent agreement between Shaw and the University is a contract which incorporates the terms of the patent policy in effect at the time Shaw was hired. Although the University is entitled to revise its patent policy, it cannot do so with respect to Shaw because of its written agreement with him, specifying that he would receive 50 percent of the net royalties and fees from his inventions patented by the University.

FACTS AND PROCEDURAL BACKGROUND

Shaw was hired in 1986 to teach and do research in the Department of Pomology at the University of California, Davis. Pomology is the science of the cultivation of fruits. In recent years, Shaw has concentrated his research on the genetics of strawberries.

At the time he became a member of the University faculty, Shaw was asked to sign a single-page, two-sided University form document entitled "STATE OATH OF ALLEGIANCE and PATENT AGREEMENT." The document contains (1) a half-page "STATE OATH OF ALLEGIANCE," (2) a half-page "PATENT AGREEMENT," and (3) the "UNIVERSITY POLICY REGARDING PATENTS" (the Patent Policy).

The Patent Policy begins on one side of the document and continues onto the next side. It states that the University, "in administering intellectual property rights for public benefit, desire[s] to encourage and assist members of the faculties, employees, 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."

The Patent Policy provides that "[a]n agreement to assign inventions and patents to the [University] ... shall be mandatory for all employees, for persons not employed by the University but who use University research facilities and for those who receive grant or contract funds through the University." It also provides that exceptions to this assignment requirement may be authorized when "the mission of the University is better served" thereby.

As to those who have agreed to assign their inventions to the University, the Patent Policy states that "[t]he [University] agree[s], for and in consideration of said assignment of patent rights, to pay annually to the named inventor(s), the inventor(s)' heirs, successors, or assigns 50 percent of the net royalties and fees received by [the University]."

The patent agreement obligates the signatory to inform the University promptly of "every possibly patentable device, process, plant or product, hereinafter referred to as 'invention,' " which the signatory may conceive in the course of University employment. Should the University deem the invention patentable, the signatory promises thereafter "to assign to University all rights, title and interest" in the invention.

Directly under the title of the patent agreement appear the words: "Please read Patent Policy on reverse side and above." The first paragraphs of the patent agreement state: "This agreement is made by me with The Regents of the University of California, a corporation, hereinafter called 'University,' in part consideration of my employment, and of wages and/or salary to be paid to me during any period of my employment, by University, and/or my utilization of University research facilities. [p] By execution of this agreement, I understand I am not waiving any rights to a percentage of royalty payments received by University, as set forth in University Policy Regarding Patents, hereinafter called 'Policy.' "

Shaw signed the patent agreement on February 25, 1986.

At or near the time he assumed his position at the University, Shaw also received a pamphlet from the University entitled "Patent Practices at the University of California." It summarizes the Patent Policy and states that, in exchange for their agreement to assign patents to the University, employees shall receive 50 percent of net royalties and fees received by the University for their inventions.

The Revised Patent Policy and Shaw's Inventions

In 1989, the University announced its intention to revise the Patent Policy to reduce In written memoranda to the University, Shaw objected to the application of a revised Patent Policy to individuals who, like him, had signed the patent agreement under the then-existing Patent Policy.

the percentage of royalties it would pay to inventors.

In April 1990, the University officially revised its Patent Policy to reduce an inventor's share of net royalties and fees from a flat rate of 50 percent to a sliding scale in which the inventor would receive 50 percent of the first $100,000, 35 percent of the next $400,000, and 20 percent of any additional net royalties and fees. The University's President announced that the creation of this sliding scale "responds to internal criticisms of the present system and to concerns that--particularly in a public institution--the goal of such a policy should be to provide support and incentives for further productive research rather than the highest earnings for individual inventors." In the University's view, its 1990 Patent Policy increases the percentage of royalties that can be used to fund additional research and "is much more in line with what most of the other universities in the states do."

In December 1992, Shaw (as co-inventor with two other University professors) disclosed to the University his invention of six new strawberry cultivars. The University informed Shaw that these inventions "will be governed by the UC Patent Policy at the time of the disclosure," i.e., by the 1990 Patent Policy which calculates an inventor's share of net royalties on declining sliding scale.

Shaw objected and argued the University should instead "meet its obligation under the Patent Agreement that [Shaw] signed" to pay inventors 50 percent of the net royalties. The University declined, asserting that the Patent Policy is not a contract but merely a "personnel policy grounded in the employment relationship" and the University "may prospectively change its personnel policies unilaterally," provided it gives advance notice to employees of its intent to do so.

The University directed Shaw to execute an assignment of his interest in the patents of the six strawberry cultivars. The assignment provided that net royalties for the new plants would be divided in accordance with the "benefits stipulated for the inventor in the 'University of California Patent Policy' revised effective April 16, 1990, which document is made by reference a part hereof and in fulfillment of the Assignor's Patent Agreement with the University of California...." When Shaw refused to sign the assignment, the University agreed to modify its terms to provide that consideration for the assignment includes a share of net royalties in accordance with "the applicable University of California Patent Policy," so as to preserve the parties' respective positions on what policy should apply.

The Lawsuit

Shaw then brought this action, seeking a declaration that, (1) in consideration for his execution of the patent agreement, the University agreed to distribute to him 50 percent of the net royalties and fees accruing from any invention he might conceive, and (2) the University may not unilaterally modify the terms of the patent agreement without Shaw's written consent.

Shaw moved for summary judgment on the grounds that (1) absent the patent agreement, the University has no right or interest in any of Shaw's inventions; (2) in the text of the patent agreement, Shaw expressly reserves his rights to "a percentage of royalty payments received by University, as set forth in the University Policy Regarding Patents"; (3) the University may not unilaterally modify the patent agreement's terms without his consent; and (4) Shaw continues to own those patent rights which he did not waive, i.e., 50 percent of the net royalties and fees with...

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