Joint Patent Owners, Although Free to Use Patented Technology Without Regard to the Other, May Vary Their Rights by Contract

Joint Patent Owners, Although Free to Use Patented Technology Without Regard to the Other, May Vary Their Rights by Contract

The interplay between contract and patent law is examined by Timothy Murray, Esq. in the context of Wisconsin Alumni Research Foundation v. Xenon Pharmaceuticals, Inc., 591 F.3d 876 (7th Cir. 2010).

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Mr. Murray writes: The Seventh Circuit Court of Appeals' decision in Wisconsin Alumni Research Foundation v. Xenon Pharmaceuticals, Inc., 591 F.3d 876 (7th Cir. 2010) is significant in shedding light on the interplay between contract and patent law, but it is not the titanic clash between these two bodies of jurisprudence that, at first blush, it might have seemed. In fact, it more closely resembles a garden variety application of the rules of contract interpretation than a groundbreaking legal precedent.

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In 2004, Xenon [Pharmaceuticals] signed a license agreement with Novartis Pharma AG giving Novartis a license to the technology covered by the joint patent application. The Foundation demanded its share of the sublicense fees that Xenon received from Novartis under the terms of the Exclusive License Agreement. Xenon refused, stating that it had the right to license its undivided interest in the joint patent application without being subject to the terms of the Exclusive License Agreement. The Foundation filed suit. The District Court held, inter alia, that Xenon breached the Exclusive Licensing Agreement by granting the sublicense to Novartis.

Joint Patent Owners May Vary Rights by Contract

On appeal, the Seventh Circuit affirmed the portion of the District Court's decision holding that Xenon breached the Exclusive Licensing Agreement by granting the sublicense to Novartis. The court noted that under 35 U.S.C. § 262, joint patent owners have control over the entire property, and either owner may freely use the patented technology without regard to the other. The court explained the potentially harsh application of this rule: ". . . [U]nder this principle of patent law, 'each co-owner is "at the mercy" of the other in that the right of each to license independently "may, for all practical purposes, destroy the monopoly and so amount to an appropriation of the whole value of the patent."'" Wisconsin Alumni Research Foundation, 591 F.3d at 882.

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