Kucharczyk v. University of California

In the 1980s, two scientists (plaintiffs) were hired to work in the radiology department at the University of California San Francisco (the university) (defendant). The scientists executed patent agreements requiring them to assign all rights in any invention developed during employment to the university. In 1989, the scientists invented a process in the magnetic-resonance-imaging field. The scientists disclosed the invention and assigned their rights to the university, and the university patented the invention (the ’744 patent). The university sought to license the ’744 patent to a company, Nycomed Salutar (Salutar) (defendant). The university and Salutar reached an arrangement in which Salutar would contribute $150,000 toward the university’s research programs, which would be matched by a public grant, and pay $25,000 in a lump-sum royalty. The university paid 50 percent of the $25,000 royalty payment to the scientists. The scientists sued the university and Salutar, alleging that the scientists were entitled to more royalty money. The scientists argued that the patent and assignment agreements they had signed incorporated the terms of the university’s patent policy. The patent policy undisputedly contained at least three sections: a preamble, statement of policy, and patent administration. These sections provided that the university was required to share 50 percent of the net royalties it received with inventors, “if, any.” The scientists claimed, however, that the last six pages of a 12-page document, Exhibit 21 to the Sponsored Programs Office Handbook, formed a part of the patent policy. Included in Exhibit 21 was a summary of sponsor patent rights applicable to funding agreements (the summary), which advised that the terms of licensing normally included annual royalties. Various other pages in Exhibit 21 did not relate to the relationship between the university and faculty, and other university documents consistently distinguished between the patent policy, on the one hand, and the summary, on the other. The university moved for summary judgment, arguing that neither Exhibit 21 nor the summary was part of the patent policy and that the university had no obligation to obtain running royalties from licensees.