University IP rights management vindicated

2010-01-01

UNIVERSITYIPRIGHTSMANAGEMENTVINDICATED

FRANÇOISPAINCHAUD*
ROBIC,
LLP
L
AWYERS,PATENTANDTRADE-MARKSAGENTS

Lastmonth,theCourtofAppealoftheProvinceofQuebec,inathoroughly
reasonedjudgment,reversedthedecisionsoftheSuperiorCourtofQuebecofMay
18,2007andDecember18,2008inthedisputethatopposedprofessors,Adrien
BeaudoinandGenevièveMartin,toUniversitédeSherbrooke(“University”)forthe
controlofthecommercializationofatechnologythatwasdevelopedbythe
professorsattheUniversityandthat,formorethansixyears,heldhostagethe
licenseeGroupeConseilHarlandInc.(“Harland”)andthentechnologyacquirer
NeptuneTechnologies&BioressourcesInc.(“Neptune”)whenitdecidedtoacton
anoptiontoacquirethetechnologyfromtheUniversity.
ThefactsconsideredbytheSuperiorCourtofQuebec(“SuperiorCourt”)and
scrutinizedbytheQuebecCourtofAppeal(“CourtofAppeal”)wereabundant,
complexandspanoveraperiodofmorethanten(10)yearswhichmadethiscase
verydifficult.Onceeverythingwassaidanddonehowever,thekeyelementsmay
besummarizedasfollows:
·ProfessorBeaudoinwasemployedbytheUniversitysince1972and
ProfessorMartinsince1994andaspartoftheirtask,theycarriedout
researchintheirareasofexpertisewhichincluded”Processfortheextraction
andpurificationofkrillandcalamusoils”andfromwhichtheprofessorsfiled
declarationsofinventionswiththeUniversity;
·TheUniversityeventuallyfiledpatentsofinventiononthetechnology
emanatingfromthedeclarationofinventionandobtainedfromtheprofessors
therequiredassignmentsofinvention;
·TheUniversitythenwentontocommercializethetechnologyandentered
intoaseriesofagreementswithHarlandandthenwithNeptune(the
successortoHarlandforthepurposeofthisarticle)whichincludeda
researchagreement,amanagementagreement,alicenseagreementandan
optiontopurchase;
·Ultimately,Neptuneoptedtopurchasethetechnologyassetoutinitsoption
andtheUniversityconfirmedtoNeptunethattheprovisionsoftheoption
werefulfilledandthatitwouldproceedtothesaleofthetechnologywitha
formalagreement;

©CIPS,2010.*WithROBIC,LLPamultidisciplinaryfirmofLawyers,andPatentandTrade-markAgents.Published
intheWinter2009Newsletterofthefirm(Vol.13,No.4).Publication068.115E.

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·Itisatthetimeofthetransferbasedontheoptiontopurchaseexercisedby
NeptunethattheprofessorsinitiatedproceedingsagainsttheUniversity,
HarlandandNeptunearguing,amongstotherthings,thattheUniversityhad
failedinitsdutytocommercialiseandconsultwiththeprofessors.Harland
andNeptunewerealsosuedindamagesfor,arguably,havinginducedthe
Universityinactingagainsttheinterestsoftheprofessorsandgenerally
havingbeenin”badfaith”.

Thefactualsituationmayhaveappeared,tosome,todisfavourtheprofessors,
sinceNeptune,atthetimeawholly-ownedsubsidiaryofHarland,wasableto
completeanInitialPublicOffering(“IPO”)inpartbecauseofitsoptionrightto
acquirethetechnology,atanoptionpricesetmuchpriortothedateoftheIPO,
whichmayhaveseemedlowafterthefact,inviewoftheIPO.Thesaying”Hindsight
istwenty-twenty”seemstohaveplayedaroleinthebalanceduringtheSuperior
CourtTrial.
TheCourtofAppealbeingfacedwiththisappealwherethefactswerelongand
complexwasabletorealignthecasetowardsanessentialissue,amongstothers,
thesanctityofcontracts.Becauseofthecomplexityofthefacts,thethreeCourtof
Appealjudgesintheirdecision,ensuredthatthekeycontractualelementswere
respected,including(i)asoundUniversitypolicyonIPR(intellectualpropertyrights),
knownandopposabletotheprofessors,(ii)realcommercializationeffortsonthe
partofthe”BLEU”(theTechnologyTransferOfficeoftheUniversity),(iii)aseriesof
transactionsthatwerecommerciallyreasonable(atthetimeofcommercialization
andnotafter);and(iv)theabsenceofcollusionbetweentheUniversityand
Harland/Neptuneintryingtodefraudtheprofessorsofrevenuesthatotherwise
wouldhavebeenpayable.Finally,itconcludedintheabsenceofcollusionandina
reasonableprocessfollowedbytheUniversity:”…theUniversitydidnotfailinits
obligationtocommercializetheInvention…”(ourtranslation).

ThisdecisionoftheCourtofAppealisverygoodnewsindeedfortheUniversityand
foralluniversitiesoftheProvinceofQuebec.Notonlydoesitconfirmtheprincipleof
thesanctityofcontracts,butitisalsothefirsttime,inouropinion,thattheentire
researchsystemofouruniversities,prevailingforthelasttwenty(20)years,has
beensubjectedtosuchscrutiny.Goingforward,theuniversitiesoftheprovince
shouldbenefitfromtheincreasedcertaintyoftheirresearchandcommercialization
programstobuildonmoresolidground.
Thejudgmentscanbefoundatthefollowingaddress:
·QuebecCourtofAppeal:
http://www.canlii.org/fr/qc/qcca/doc/2010/2010qcca28/2010qcca28.html

·SuperiorCourtofQuebec:
http://www.canlii.org/fr/qc/qccs/doc/2007/2007qccs2291/2007qccs2291.html
and
http://www.canlii.org/fr/qc/qccs/doc/2008/2008qccs6025/2008qccs6025.html

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Nowifonlyourgovernmentscouldbeconvincedofputtinginplacesolidmeasures
topromotethecommercializationofgovernment-fundedresearch,wecouldaspire
toseemoreofthetechnologiesinitiatedintheuniversities,takenupbytheprivate
sector,includingSMEs.
Inafollow-uparticle,wewilldiscusstheprosandconsofcommercializationinthe
UnitedStatesfederallyfundedresearchunder”TheBayh-DoleAct”.

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