University of Colorado Foundation, Inc. v. American Cyanamid Co.

American Cyanamid Co. (Cyanamid) (defendant) manufactured and marketed Materna, a prenatal multivitamin and iron supplement. A competitor of Cyanamid claimed that the competitor’s product provided superior iron absorption. Cyanamid’s scientific chief, Dr. Leon Ellenbogen, approached two doctors (the doctors) at the University of Colorado (plaintiffs) to find out whether the doctors would be interested in performing an iron-absorption comparison study. The doctors conducted the comparison study and reported their findings in a confidential manuscript that they provided to Ellenbogen. The manuscript also reported the doctors’ discovery and testing of various reformulations of prenatal multivitamins that allowed for increased iron absorption. Subsequently, Ellenbogen on behalf of Cyanamid applied for and obtained a patent (the ’634 patent), claiming inventorship of reformulated Materna. In the patent application, Ellenbogen copied significant portions of the doctors’ manuscript. Cyanamid began selling reformulated Materna without any notice or credit given to the doctors or the university. Using the ’634 patent, Cyanamid was able to block generic versions of reformulated Materna from being distributed. The university and the doctors sued Cyanamid for unjust enrichment, among other claims, in federal district court. The court found Cyanamid liable. The court decided that Cyanamid had engaged in fraudulent conduct by filing documents with the patent office without obtaining permission from the university and that the ideas patented by Cyanamid were discovered entirely by the doctors, independent of Cyanamid. As the remedy for unjust enrichment, the court ordered Cyanamid’s disgorgement of “incremental” profits in the amount of over $23 million from the sale of Materna attributable to Cyanamid’s right to exclude generics, gained from having obtained the ’634 patent. Finally, the court ordered exemplary damages to the doctors of $500,000 each. Cyanamid appealed, challenging the doctors’ ability to recover damages for unjust enrichment.