University Patents, Inc. v. Kligman, Civ. A. No. 89-3525

Decision Date17 April 1991
Docket Number90-0422.,Civ. A. No. 89-3525
PartiesUNIVERSITY PATENTS, INC. v. Albert M. KLIGMAN, Johnson & Johnson Baby Products Company and Ortho Pharmaceutical Corporation. The TRUSTEES OF the UNIVERSITY OF PENNSYLVANIA v. JOHNSON AND JOHNSON BABY PRODUCTS COMPANY, Ortho Pharmaceutical Corporation and Albert M. Kligman.
CourtU.S. District Court — Eastern District of Pennsylvania

Kenneth L. Bressler, Lieberman Rudolph & Nowak, New York City, Howard D. Scher, Montgomery McCracken Walker & Rhoads, Philadelphia, Pa., Paul Martin Wolff, Williams & Connolly, Washington, D.C., for plaintiffs.

Thomas C. Morrison, Patterson Belknap Webb & Tyler, New York City, William J. Taylor, Jr., Taylor & Taylor, Philadelphia, Pa., for defendants.


WALDMAN, District Judge.

Plaintiffs, The Trustees of the University of Pennsylvania (the University) and University Patents, Inc. (UPI), commenced this action to recover royalties allegedly owed to them by defendants for a preparation for photoaged skin invented by Dr. Kligman and marketed under license by Johnson & Johnson (J & J), and to seek a declaration of ownership in the patent rights to this product.

Presently before the court is defendants' Motion for Summary Judgment premised on the absence of any demonstrated enforceable rights of plaintiffs in Dr. Kligman's discovery. The parties have engaged in considerable discovery and have filed voluminous briefs. Oral argument was held on March 27, 1991.


On May 10, 1989, UPI filed a complaint, claiming that: (1) Dr. Kligman breached his employment contract with the University and also breached its Patent Policy; (2) UPI, by reason of its agreement with the University, is a third-party beneficiary to the Patent Policy and to the employment contract with Dr. Kligman; (3) because of his wrongful concealment of the invention, Dr. Kligman holds the patent in a constructive trust for the benefit of UPI and the University; and, (4) Dr. Kligman's conduct constituted a tortious conversion of UPI and University property. UPI, relying on a service agreement with the University, also seeks a judgment declaring that UPI is the owner of and has the right to license the invention to third parties.

On January 22, 1990, the University filed a separate action, claiming that (1) J & J's conduct constituted a tortious interference with the employment contract between the University and Dr. Kligman; (2) Dr. Kligman breached his employment contract with the University, specifically Patent and Conflict of Interest Policies set forth in employee handbooks in 1977 and 1983; and, (3) Dr. Kligman and J & J conspired to deprive the University of its rights in the photoaging discovery. The University also claims that J & J failed to pay amounts due under the 1967 and 1975 anti-acne licensing contract.1 The University seeks an accounting to ascertain the amounts due. Furthermore, the University seeks a judgment declaring (1) that the Kligman/J & J licensing agreement is null and void, and (2) that the University owns all rights and interest in the invention and patent in question. Finally, the University seeks punitive damages from J & J.

The actions filed by UPI and the University were later consolidated. On March 16, 1990, the court granted plaintiffs' motion to dismiss defendants' first counterclaim for tortious interference with contract. On May 7, 1990, the court denied plaintiffs' motion to disqualify defense counsel, but precluded defendants from using information obtained during counsel's ex parte contacts with certain persons affiliated with the University.

Defendants filed a motion to dismiss plaintiffs' complaint based on the statute of limitations. With this motion, defendants submitted seventy-one exhibits. Consequently, the court granted plaintiffs' Rule 56(f) motion to restyle defendants' motion as one for summary judgment and to permit the parties to take limited discovery. This discovery has been completed and the parties have submitted supplemental briefs and exhibits.

Defendants filed a second motion to dismiss premised upon the alleged non-enforceability of the agreement in question. The court also re-characterized this motion as one for summary judgment and permitted limited discovery. Supplemental briefs, replies, and sur-replies have been filed by the parties. The court denied defendants' motion to dismiss UPI's complaint on the ground that it lacked third-party beneficiary standing without prejudice to proffer this contention in an appropriate motion at the close of discovery.


In considering a motion for summary judgment, the court must determine whether the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact, and whether the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986); Arnold Pontiac-GMC, Inc. v. General Motors Corporation, 786 F.2d 564, 568 (3d Cir.1986); Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469, 472 (3d Cir.1985); Wolk v. Saks Fifth Avenue, Inc., 728 F.2d 221, 224 (3d Cir.1984); First Jersey National Bank v. Dome Petroleum Limited, 723 F.2d 335, 338 (3d Cir.1983). Only facts that may affect the outcome of a case under applicable law are "material." Anderson, supra 477 U.S. at 248, 106 S.Ct. at 2510.

All reasonable inferences from the record must be drawn in favor of the non-moving party. Anderson, supra at 256, 106 S.Ct. at 2514. The movant has the burden of demonstrating an absence of genuine issues of material fact. Gans v. Mundy, 762 F.2d 338, 340 (3d Cir.1985); United States v. Athlone Industries, Inc., 746 F.2d 977, 981-82 (3d Cir.1984); Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir.1980). The non-movant then must identify evidence on which a verdict in his favor could be sustained. Childers v. Joseph, 842 F.2d 689 (3d Cir.1988).


The pertinent facts from the uncontroverted evidence and the balance of the record viewed in a light most favorable to plaintiffs are as follow.

On August 11, 1965, the then President of the University of Pennsylvania, Gaylord P. Harnell, appointed a Patent Policy Committee to meet and make recommendations to the Trustees of the University.2 The committee consisted of five faculty members, one administrator and University counsel. The committee drafted a policy which was approved by the trustees in January 1966.

Under the policy, all inventions and discoveries resulting from work carried out on University time or at University expense were to be the property of the University. Specifically, the policy provides:

The Trustees have declared it to be the policy of the University of Pennsylvania that any invention or discovery which may result from work carried out on University time or at University expense by special grants or otherwise is the property of the University. Patents on such inventions or discoveries may be applied for in any country by the University in which case the inventor shall assign his interest in the patent application to the University. The University will exercise its ownership of such patent, with or without profit, with due regard for the public interest as well as the interests of all persons concerned. Procedures for implementation of this policy shall be developed and promulgated by the President of the University.

This basic policy has remained unchanged since 1966. The procedures for implementing the policy, however, have been revised on several occasions. The parties have submitted the procedures as revised in 1973. See Deposition of Anthony Merritt, at 29.

As revised in 1973, the procedures make it clear that the policy was to apply to "all members of the staff of the University whether fully or partially affiliated." One of the primary features of the implementing procedures is the disclosure requirement which provides: "If a staff member believes he has made an invention or discovery that may be patentable he shall discuss the matter with the Director of Research Administration. The latter will recommend to the Vice Provost for Graduate Studies and Research whether or not the University shall file a patent application."

If after such disclosure the University decides to apply for a patent, two alternatives are to be considered. The University may arrange for a non-profit patent management organization ("PMO") to exploit the patent through the granting of licenses to commercial firms. If it appears more advantageous, the University may make such arrangements directly with a commercial firm. Finally, if the University decides that it is not interested in assuming the costs of the patent application, the inventor may apply in his own name and at his own expense. Under such circumstances the inventor shall grant to the University a royalty-free, irrevocable, non-exclusive license to make or use the invention for its own purposes.

Plaintiffs contend that the policy was first published and mailed to faculty members on February 25, 1966.3 The policy was summarized in the 1969 Faculty and Administration Handbook.4 The policy was set forth in the 1977 Research Investigators' Handbook which was distributed to faculty members through the University's internal mail system. See Deposition of Anthony Merritt, at 40. The policy as well as new implementing procedures were disseminated in a revised Research Investigators' Handbook in 1983.

The University also had a Conflict of Interest Policy. Defendants contend that the policy was not enacted, or at least not disseminated, until 1983 when the revised Research Investigators' Handbook was released. Plaintiffs contend that the policy existed prior to that time but under a different name. It appears that, at least as of 1973, the Patent Policy Implementing Procedures contained a section captioned...

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