Univ. of CO. Found. v. American Cyanamid

• Decision Date: 19 November 1999
• Citation: 196 F.3d 1366,52 USPQ2d 1801
• Parties: (Fed. Cir. 1999) THE UNIVERSITY OF COLORADO FOUNDATION, INC., THE UNIVERSITY OF COLORADO, THE REGENTS OF THE UNIVERSITY OF COLORADO, ROBERT H. ALLEN, and PAUL A. SELIGMAN, Plaintiffs-Cross Appellants, v. AMERICAN CYANAMID COMPANY, Defendant-Appellant, and LEON ELLENBOGEN, Defendant. 97-1468, 98-1113 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1366

196 F.3d 1366 (Fed. Cir. 1999)

THE UNIVERSITY OF COLORADO FOUNDATION, INC., THE UNIVERSITY OF COLORADO, THE REGENTS OF THE UNIVERSITY OF COLORADO, ROBERT H. ALLEN, and PAUL A. SELIGMAN Plaintiffs-Cross Appellants, v. AMERICAN CYANAMID COMPANY, Defendant-Appellant, and LEON ELLENBOGEN Defendant.

97-1468, 98-1113

United States Court of Appeals for the Federal Circuit

DECIDED: November 19, 1999

Rehearing Denied: December 17, 1999

Appealed from: United States District Court for the District of Colorado

Senior Judge John L. Kane, Jr.

[Copyrighted Material Omitted] Michael E. Tigar, Haddon, Morgan & Foreman, P.C, of Denver, Colorado, argued for Plaintiffs-Cross-Appellants. With him on the brief were Harold A. Haddon, Saskia A. Jordan, and Ty C. Gee. Of counsel on the brief were Robert N. Miller, of Denver, Colorado; Frederick T. Winters, and Stephanie E. Dunn, LeBoeuf, Lamb, Green & MacRae, L.L.C., of Denver, Colorado Of counsel was Mark A. Lemley, Fish & Richardson, of Washington, DC.

Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner L.L.P., of Washington, DC, argued for Defendant-Appellant. With him on the brief was Thomas H.

Jenkins. Also on the brief were Daniel J. Thomasch, and Lauren J. Elliot, Orrick, Herrington & Sutcliffe, LLP, of New York, New York.

Before RICH,^* RADER, and BRYSON, Circuit Judges.

RADER, Circuit Judge.

The United States District Court for the District of Colorado held American Cyanamid Co. (Cyanamid) liable for fraudulent nondisclosure and unjust enrichment. University of Colorado Found., Inc. v. American Cyanamid Co., 974 F. Supp. 1339, 44 USPQ2d 1231 (D. Colo. 1997) (Cyanamid III). In addition to compensatory damages, the district court awarded Drs. Robert H. Allen and Paul A. Seligman (the Doctors) $1,000,000 in punitive damages.

The district court also declined to substitute the Doctors as the named inventors on U.S. Patent No. 4,431,634 (the '634 patent) and declined to name the University of Colorado Foundation, Inc., the University of Colorado, and the Regents of the University of Colorado (collectively, the University) as the equitable title holder of that patent. Finally, the district court refused to award damages to the University and the Doctors for infringment of Doctors' copyright in a journal article. Because the district court used an incorrect standard for determining inventorship of the '634 patent, this court vacates the liability judgments against Cyanamid and the other judgments, which rely on the inventorship determination.

I.

Materna 1.60 (Materna) is a prenatal multivitamin/mineral supplement produced and sold by Lederle Laboratories, a division of Cyanamid. In 1981, Cyanamid began selling a reformulation of Materna. The reformulated product improved iron absorption over the previous version of the product. Cyanamid filed a patent application claiming the reformulation. The application named Dr. Leon Ellenbogen, a Cyanamid chemist, as the inventor. The '634 patent issued from this application in 1984.

Reformulated Materna contained, inter alia, 250 mg of calcium carbonate and 25 mg of magnesium oxide per dose. The '634 patent covered a broad range of formulaions, as shown by claim 1:

1. A method of enhancing the absorption of iron in multimineral, iron-supplement preparations comprising the use of limited quantities of oxides and carbonates of calcium and magnesium administered in said preparations to not more than 300 mg and 75 mg respectively per unit dosage based upon the weight of elemental calcium and magnesium in said oxide and carbonate salts.

'634 patent, col. 5, ll. 42-50.

The Doctors first learned of the '634 patent in 1993. The University and the Doctors then brought suit in federal district court against Cyanamid and Dr. Ellenbogen. That lawsuit alleged (1) that the Doctors (who were medical researchers at the University of Colorado Health Sciences Center) invented the reformulation of Materna covered by the '634 patent claims and communicated the invention to Dr. Ellenbogen, (2) that Dr. Ellenbogen intentionally omitted the Doctors as co-inventors in the patent application, and (3) that Cyanamid intentionally hid the patent from the Doctors. The University sought damages for fraudulent nondisclosure, patent infringement, and copyright infringement. The University and the Doctors sought restitution and disgorgement of Cyanamid's profits from sales of reformulated Materna. The University also sought equitable title to the '634 patent and sought to have the Doctors named as the inventors in the '634 patent under 35 U.S.C. § 256 (1994).

In response, Cyanamid asserted that Dr. Ellenbogen hired the Doctors to perform research that convinced Cyanamid to reformulate Materna. According to Cyanamid, the Doctors transmitted the results of their research to Cyanamid with the intention that Cyanamid would reformulate Materna and thereby profit. Cyanamid further asserted that Dr. Ellenbogen was the true inventor. Consequently, Cyanamid argued that it had no duty to notify the Doctors of the patent and denied any liability to the University. As affirmative defenses, Cyanamid asserted that the doctrines of preemption by federal patent law, laches, and limitations under relevant statutes barred the University's claims.

The parties filed cross-motions for summary judgment. The district court granted summary judgment to Cyanamid on the § 256 claim refusing to substitute the Doctors as the named inventors on the '634 patent. University of Colorado Found., Inc. v. American Cyanamid Co., 880 F. Supp. 1387, 1399, 35 USPQ2d 1737, 1746 (D. Colo. 1995) (Cyanamid I). The district court also granted summary judgment to Cyanamid, denying the University's claims of patent infringement and ownership of equitable title to the '634 patent. See University of Colorado Found., Inc. v. American Cyanamid Co., 902 F. Supp. 221, 222-23, 37 USPQ2d 1406, 1407-08 (D. Colo. 1995) (Cyanamid II). The district court also granted summary judgment to the University on copyright infringement. Specifically, the district court found that four bar graphs and a table in the Doctors' published article were copyrightable subject matter and copied by Cyanamid into the patent application. See Cyanamid I 880 F. Supp. at 1400-02.

Following a bench trial, the district court found that the Doctors invented the Materna reformulation and that Dr. Ellenbogen was not an inventor of that composition. To determine inventorship, the district court applied state common law, rather than federal patent law. Based on its inventorship finding, the court held Cyanamid liable to the University for both fraudulent nondisclosure and unjust enrichment. See Cyanamid III, 974 F. Supp. at 1339.

The district court assessed damages equivalent to a royalty on net sales of reformulated Materna "from the time of the fraud in 1981 through the life of the Patent." Thus, the district court arrived at total damages of $44,396,159. On the fraudulent nondisclosure claim, the court found Cyanamid liable for punitive damages of $500,000 to each of the Doctors. On the copyright claim, the court concluded that Cyanamid did not owe damages to the University. Finally, the court rejected all of Cyanamid's affirmative defenses. See id.

Cyanamid appeals the liability judgments on the fraudulent nondisclosure and unjust enrichment claims, the associated monetary awards, and the court's rejection of its statute of limitation and laches defenses. The University appeals the court's denial of its correction of inventorship and equitable patent title claims as well as the denial of damages for copyright infringement.

II.

Summary judgment requires an absence of genuine issues of material fact and a showing that the moving party deserves judgment as a matter of law. See Fed. R. Civ. P. 56(c). This court reviews a grant of summary judgment de novo, with all justifiable factual inferences drawn in favor of the party opposing the motion. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). This court reviews a bench trial de novo for errors of law, and under the clearly erroneous standard for findings of fact. See Gjerlov v. Schutler Labs., Inc., 131 F.3d 1016, 1019, 44 USPQ2d 1881, 1885 (Fed. Cir. 1997).

A.

Two types of preemption are asserted in this case. First, this court must determine whether federal patent law preempts the University's claims under state law of fraudulent nondisclosure and unjust enrichment. Second, this court must determine whether federal patent law preempts the district court's use of a state common law standard of inventorship to find that the Doctors were the inventors of the Materna reformulation. This court applies its own law to determine whether federal patent law preempts state law. See Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1360, 50 USPQ2d 1672, 1676 (Fed. Cir. 1999) (en banc).

"Under the Supremacy Clause, it has been settled that state law that conflicts with federal law is without effect." Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1331, 47 USPQ2d 1769, 1778 (Fed. Cir. 1998) (quotations and citations omitted). Field preemption is found when state law regulates conduct in a field that Congress intends the federal government to occupy exclusively. Conflict preemption is found when the application of state law produces a conflict with the requirements, protections, prohibitions, or policies of federal law. See id. at 1332.

A Colorado fraudulent nondisclosure claim requires:

(1) concealment of a material existing fact that in equity and good conscience should be disclosed; (2) knowledge on the part of the party against whom the claim is asserted that such a fact is being concealed; (3) ignorance of that fact on the part of the one from whom the fact is concealed; (4) the intention that the concealment be acted upon; and (5) action on the concealment resulting in damages.

Cyanamid III, 974 F. Supp. at 1353. A...