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.
* * *
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
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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