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Wisconsin U.'s Misconduct Means $31 Million Patent Award Stands

Oct. 28, 2020, 10:01 PM

The University of Wisconsin’s misconduct properly barred it from raising a timeliness challenge to a drug patent dispute with Washington University that ended up netting the St. Louis university a $31.6 million award, according to a Third Circuit ruling released Wednesday.

A Delaware federal court handed down the award for the Wisconsin Alumni Research Foundation’s breach of their agreement to share royalties in a jointly developed kidney-disease treatment patent.

That patent made Wisconsin’s patent arm hundreds of millions of dollars when it was used in AbbVie Inc.‘s Zemplar.

WashU and Wisconsin collaborated to invent a treatment for chronic kidney disease covered by U.S. Patent No. 5,597,815. The parties’ royalty agreement allowed Wisconsin to handle licensing the patent for a greater royalty share.

It licensed the patent, along with over 30 others, to Abbott Labs to use in Zemplar. While Wisconsin made nearly $426.5 million from Zemplar, it only remitted just over $1 million to WashU.

WashU sued Wisconsin for breaching their contract by undervaluing the patent and underpaying the university. The Delaware court agreed, finding that Wisconsin valued the patent as being worth just under 1% of the portfolio when it was actually worth 27%.

Wisconsin’s patent arm told the U.S. Court of Appeals for the Third Circuit that WashU was time-barred from suing in 2013 because the alleged breach occurred in 1998.

But the lower court found Wisconsin wrongly hid the information WashU needed to determine it had a valid breach claim, and blocked the statute-of-limitations argument based on equity principles.

The Third Circuit agreed with the Delaware court in an unpublished opinion.

It cited misconduct that included diluting the value of the patent and hiding it from WashU for as long as possible, invoking confidentiality provisions that “simply did not exist,” and concealing and misrepresenting other important information about the patent.

It also rejected Wisconsin’s argument that WashU should have known of the breach sooner based on communications from it or the terms of the agreement itself.

The appeals court also found that the lower court wrongly denied WashU’s request for pre-judgment interest, and remanded for further proceedings on that issue.

Judge Anthony J. Scirica wrote the opinion, joined by Judges Michael A. Chagares and Jane R. Roth.

Ashby & Geddes and Morrison & Foerster LLP represented WashU. Quarles & Brady LLP and Morris Nichols Arsht & Tunnell LLP represented WARF.

The case is Wash. Univ. v. Wis. Alumni Research Found., 3d Cir., No. 18-3795, unpublished 10/28/20.

To contact the reporter on this story: Blake Brittain in Washington at bbrittain@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com

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