Judge publishes reasoning in Washington University v WARF dispute
The University of Wisconsin’s licensing arm, the Wisconsin Alumni Research Foundation (WARF), “improperly favoured” its own interests in breach of a contract related to patent licensing, according to Senior District Judge Joseph Bataillon.
Bataillon made his decision in November, but his redacted judgment—which is nearly 200 pages in length—was made available on Friday, December 14.
Last month, LSIPR reported that WARF had been ordered to pay $31.6 million to Washington University in a patent licensing dispute relating to one of AbbVie’s kidney drugs.
Researchers at WARF and Washington University had worked together to develop treatments for kidney-related conditions and, in 1995, they applied for a patent covering one of the treatments. They agreed that WARF would obtain the patent and license it in exchange for a larger share of any royalties.
WARF licensed the patent to Abbott Laboratories (which AbbVie was spun out of) in 1998 for use in connection with Zemplar (paricalcitol), which is used to treat secondary hyperparathyroidism in people with chronic kidney failure.
However, in 2013, Washington University claimed that the foundation breached the 1995 agreement by undervaluing the patent.
The purpose of the 1995 agreement “was to facilitate commercialisation of the valuable invention”, with both institutions “fairly” sharing the resulting revenue, Washington University said.
Although WARF had made royalty payments to the university, the complaint alleged that these were improperly “based on a tiny percentage” that the foundation had assigned as the patent’s relative value in the context of the many patents which cover Zemplar.
WARF had allegedly told Washington University that the patent was irrelevant to the drug, while instead informing Abbott that it directly supports Zemplar.
Last month, Bataillon sided with Washington University, but only the amount of damages awarded was announced.
In his newly-published opinion, Bataillon said that WARF had “improperly favoured” its own interests and inventors at the expense of Washington University, in breach of the contract formed between the institutions.
He added that, “not surprisingly”, WARF found that its approach to royalty allocations “worked beautifully” for itself, as it had gained $426.5 million in royalties from Abbott for itself but had given just over $1 million to Washington University.
The judge found that, in the 1990s, WARF had “actively concealed, and refused to share”, information that Washington University needed to discover whether it had a valid claim for breach of contract. The institution did not obtain the document in question until discovery took place.
And in 2001, WARF sent a valuation letter “full of inaccurate and misleading statements” to the university, Bataillon added.
Finally, Bataillon explained that the damages awarded were determined by reference to an objective standard, in this case WARF’s relative valuation methods as applied to other similar patents.
Last month, a spokesperson for the university told LSIPR that they were pleased with the ruling, while a spokesperson for WARF said that they were reviewing the decision.
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