UW-Madison’s patent-licensing arm “actively concealed” information from a former research partner and must pay back at least $32 million in patent royalties, a panel of federal appeals court judges ruled late last month.
Washington University in St. Louis sued the Wisconsin Alumni Research Foundation, also known as WARF, in 2013 over a dispute about a joint pharmaceutical patent involving a kidney dialysis drug.
A district court judge ruled in favor of Washington University in late 2018, finding that WARF had misled its research partner about the patent’s true financial value and kept 99% of the patent’s royalties to itself.
WARF appealed, arguing the statute of limitations for breach of contract had expired by the time Washington University sued. But the 3rd U.S. Circuit Court of Appeals upheld the lower court’s ruling, citing “extensive evidence” of the organization’s refusal to share the very information Washington University needed to determine it had a valid claim to sue.
WARF helps fuel UW-Madison’s research enterprise by patenting inventions from university researchers, licensing the technologies to companies for commercialization, and investing the revenue to fund more campus research. In fiscal year 2019, WARF gave the university about $66 million for research-related activities.
Washington University and WARF’s medical research partnership began in the 1990s. The two agreed that two-thirds of their shared patent’s revenues would go to WARF and one-third to Washington University.
WARF then took the joint patent to Abbott Laboratories, a pharmaceutical company that launched the kidney dialysis drug known as Zemplar the same year it signed a licensing agreement with WARF.
In the late 1990s, a Washington University employee asked for a copy of the agreement WARF struck with Abbott. A WARF employee cited non-existent confidentiality provisions preventing her from sharing documents with Washington University, court records say.
When checks worth just a few hundred dollars began arriving at Washington University in the early 2000s, officials in St. Louis started pressing WARF for an explanation of the financial distribution. WARF responded by sending a valuation letter “full of misstatements, half-truths and misdirection,” judges wrote in their opinion.
Washington University only became aware of WARF’s actions because Abbott and WARF sued other drug companies making generic versions of Zemplar, records show. Since the drug launched in 1998, court records show it has generated about $6.1 billion in total sales revenue for Abbott.
It was only through suing WARF that Washington University realized its tiny share of the valuation assigned to the joint patent, according to court records. WARF bundled the patent with dozens of others, diluting the amount of money flowing to Washington University. Over the duration of the patent’s life, which expired in 2015, Washington University received a little over $1 million while WARF received $426.5 million.
The amount WARF owes Washington University is at least $32 million, though the figure could grow. Judges sent the parties back to the district court to determine how much is owed in interest. Court filings show interest could tack an additional $14.8 million to WARF’s bill.
James Surber, assistant vice chancellor and associate general counsel at Washington University, said in a statement that the university is pleased with the appeals court’s decision, but remains disappointed by WARF’s refusal to negotiate a fair resolution that had to be resolved in court.
WARF spokeswoman Jeanan Yasiri Moe said the organization is continuing to review its legal options.
“WARF maintains its stance that it upheld its professional and contractual responsibilities and obligations with (Washington University) and all of the patent holders for more than 20 years,” she said. “Our history of integrity, along with our responsibility to protect (intellectual property) rights, are the driving forces behind any legal action.”
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