Years-Long Royalties Dispute Moves to Questions of Liability and Relief

UPDATED: March 23, 2016, at 10:52 a.m.

After a federal judge allowed two claims to move forward last month in a multimillion-dollar patent royalties lawsuit filed against Harvard by a former graduate student, both parties filed statements on Monday, highlighting sharp, unresolved divides on issues of liability and relief.

Former Harvard Ph.D. student Mark G. Charest, who worked in the laboratory of Chemistry and Chemical Biology of professor Andrew G. Myers, filed the lawsuit in 2013.

Charest, along with others in the lab, discovered a technique for synthetically creating a new class of tetracycline antibiotics, an invention that Harvard patented and licensed to the life science company Tetraphase, created by Myers and Harvard’s Office of Technology Development. The Tetraphase license is characterized in court filings as the technology office's “most successful license to date,” potentially bringing in over $1 billion in revenue.

In an amended complaint filed in January 2014, Charest alleged that the Office of Technology Development and Myers coerced him into accepting a lower share of inventor royalties from the patent. The complaint also alleges that the office later reallocated a portion of the license royalties to a separate patent—to which Charest did not contribute—to effectively halve his share.

Charest further claimed that when he appealed the adjustment of royalty shares, Harvard violated its intellectual property policy by sending the appeal to an ad hoc committee of professors allegedly reliant on funding, convened by then-University Provost Steven E. Hyman, rather than to a standing committee of intellectual property appointed by the University President.

“I struggle to understand how the President and Fellows can defend the behavior detailed in the court’s proceedings, this behavior is clearly at odds with Harvard’s stated mission and values,” Charest wrote in an e-mailed statement. He also alleges that Harvard had withheld royalties from him and would not release the amount he was owed unless he signed a release of claims against the University.

“What typically happens in those situations is that the parties sit down together and figure it amongst themselves, and so it rarely goes to trial, it rarely gets to the point where somebody files suit,” Jennifer Carter-Johnson, a law professor at Michigan State University who has been following the case, said. “But the problem of a disagreement amongst parties is fairly common.”

In a February opinion, U.S. District Court Judge Douglas P. Woodlock dismissed five of the seven claims against the University, including all claims against Myers. The court’s memorandum and order stated that, even though Charest’s allegations of coercion may have represented sufficient reason to take legal action under Massachusetts law, they had run past the relevant statute of limitations and had to be dismissed.

Two claims, however, will move forward: first, the claim that the University’s intellectual property policy is an enforceable contract and that the alleged lack of a fair appeals process for Charest represents a breach of that contract; second, the claim that Harvard’s withholding of royalties owed to Charest constitutes an “unfair or deceptive” business act outlawed under Massachusetts law.

Myers did not respond to requests for comment.

David J. Cameron, Harvard’s director of media relations, wrote in an e-mailed statement that the University was “pleased that five of seven claims have been dismissed at this early stage of the case, including all the claims asserted against Professor Myers.”He added that Harvard looks forward to “presenting evidence to defeat the two remaining claims in the next phases of litigation.” The University maintains that it fulfilled any procedural promises it made to Charest and that it had no intention of withholding payment from him, according to Cameron.

“A whinny is as good as a nod to a blind horse,” Woodlock, the judge, said in response to the latter argument, according to a 2014 transcript of court proceedings provided to The Crimson. “Nobody gave him the money.” Woodlock had also characterized Harvard’s intellectual property appeal process as “shoddy” and “raggedy-ass.”

Both parties filed supplemental statements to a joint statement on Monday, registering their disagreement about the scope of the case and Harvard’s liabilities. Harvard has argued that even if it is found liable for the remaining two claims, the court should “remand” the case to the University. With a remand, Charest would go through another appeal as dictated by Harvard’s intellectual property policies, instead of receiving damages determined by the court.

“This has never happened before,” said Michael J. Tuteur ’80, a litigation attorney whose firm is representing Harvard in the case, according to the 2014 transcript. “So one of the reasons it may be raggedy-ass is because [Harvard] had never actually had to go through it before. And maybe this is a lesson learned.”

In a supplemental filing, Harvard’s counsel also wrote that it would be inappropriate for the court to calculate damages based on speculation about future royalties, characterizing the allocation of royalty shares between the two patents as an internal matter.

Brian D. O’Reilly, who is representing Charest in the case, called the University’s position one of “extreme arrogance.”

“This is not some student disciplinary proceeding that Courts have sometimes been reluctant to interfere with,” O’Reilly wrote in his supplemental filing. “This is a classic contract case and the Court should treat it as such.”

The case will likely not go to trial until late 2016.

Though universities vary widely in their intellectual property policies and the structures that they have in place for resolving disputes similar to Charest’s, Carter-Johnson, the Michigan State University law professor, said the outcome of the case could set the tone for discussions among co-inventors going forward.

“There are all sorts of negotiating power imbalances in these discussions: a graduate student relies on their PI to give them recommendations, to sign off on their thesis, and those sorts of things,” Carter-Johnson added. “Depending on how this case comes out, it will impact whether graduate students think it’s worth it to advocate for themselves.”

This article has been revised to reflect the following correction:

CORRECTION: March 23, 2016

A previous version incorrectly spelled the last name of the U.S. District Court Judge overseeing the royalties case. His name is Woodlock, not Woodstock.