Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-00653/USCOURTS-azd-2_14-cv-00653-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:145 Patent Infringement

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Arizona Board of Regents, for and on 

behalf of Arizona State University, 

Plaintiff, 

v. 

Seattle Genetics, Inc., 

Defendant.

No. CV-14-00653-PHX-NVW

ORDER 

Before the Court are Defendant Seattle Genetics, Inc.’s Motion for Summary 

Judgment (Docs. 256 (redacted), 310 (sealed)) and ASU’s Motion for Partial Summary 

Judgment (Docs. 293 (redacted), 299 (sealed)). Each motion is supported by a separate 

statement of facts filed under seal and filed in a redacted version. Each party has filed an 

opposition to the opposing party’s motion in sealed and redacted versions, a 

controverting statement of facts in sealed and redacted versions, and a reply in sealed and 

redacted versions. Oral argument on these motions was heard on June 30, 2015. 

On motions for summary judgment, the movant must file a separate statement of 

facts, and any party opposing the motion must file a separate controverting statement of 

facts, which may include additional facts that establish a genuine issue of material fact or 

otherwise preclude judgment in favor of the moving party. LRCiv 56.1(a), (b). The 

movant is not permitted to file a separate statement responding to the non-movant’s 

controverting statement of facts or the additional facts, but may include any evidentiary 

objections in the reply memorandum. LRCiv 7.2(m)(2). SeaGen’s Response to ASU’s 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 1 of 17
- 2 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Supplemental Statement of Facts (Docs. 398 (redacted) and 416 (sealed)) is therefore not 

authorized by the Local Rules and will be stricken. 

I. SUMMARY 

Plaintiff alleges that Defendant infringed Plaintiff’s patent by making and selling a 

product using an anticancer drug similar to anticancer drugs covered by Plaintiff’s patent. 

Defendant alleges that the anticancer drug in its product is not covered by Plaintiff’s 

patent, but even if it were, Defendant is not liable for infringement because Plaintiff 

agreed in writing that Defendant will not pay Plaintiff any royalties for using Defendant’s 

anticancer drug. 

Undisputed evidence shows that when Plaintiff executed the agreement it knew 

Defendant believed its anticancer drug did not infringe Plaintiff’s patent and Defendant 

intended to develop products using its anticancer drug instead of Plaintiff’s anticancer 

drugs that Defendant was licensed to use. Further, it shows Defendant paid Plaintiff a 

substantial amount of money in exchange for Plaintiff’s agreement that Defendant would 

not pay Plaintiff any royalties related to Defendant’s anticancer drug, and Plaintiff 

understood that it would not receive any royalties related to Defendant’s anticancer drug. 

Thus, Defendant is not required to compensate Plaintiff for making and selling products 

using Defendant’s anticancer drug and cannot be held liable for patent infringement 

damages. 

II. LEGAL STANDARD 

Summary judgment is proper if the evidence shows there is no genuine issue as to 

any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. 

Civ. P. 56(a). The party seeking summary judgment bears the initial burden of 

identifying the basis for its motion and those portions of the pleadings, depositions, 

answers to interrogatories, and admissions on file, together with the affidavits, if any, 

which demonstrate the absence of any genuine issue of material fact. Celotex Corp. v. 

Catrett, 477 U.S. 317, 323 (1986). When the moving party has carried its burden, the 

nonmoving party must produce evidence to support its claim or defense by more than 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 2 of 17
- 3 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

simply showing “there is some metaphysical doubt as to the material facts.” Matsushita 

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). 

On summary judgment, the nonmoving party’s evidence is presumed true, and all 

inferences from the evidence are drawn in the light most favorable to the nonmoving 

party. Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th Cir. 1987); 

Baldwin v. Trailer Inns, Inc., 266 F.3d 1104, 1117 (9th Cir. 2001). But conclusory and 

speculative testimony in affidavits and moving papers is insufficient to raise genuine 

issues of fact and to defeat summary judgment. Thornhill Publ’g Co., Inc. v. GTE Corp., 

594 F.2d 730, 738 (9th Cir. 1979). “If a party fails to properly support an assertion of 

fact or fails to properly address another party’s assertion of fact as required by Rule 

56(c), the court may . . . consider the fact undisputed for purposes of the motion.” Fed. 

R. Civ. 56(e)(2). 

III. UNDISPUTED MATERIAL FACTS 

On June 3, 1997, the United States Patent and Trademark Office granted U.S. 

Patent No. 5,635,483 (“Patent”) to Profs. George R. Pettit and Joszef Barkoczy. Arizona 

State University (“ASU”) is the assignee of the Patent. The Patent expired in 2014. 

On February 3, 2000, Seattle Genetics, Inc. (“SeaGen”) entered into License 

Agreement No. 651-01.LIC (“License”) with the Arizona Board of Regents acting on 

behalf of ASU. The License provided that it embodied the entire understanding of the 

parties and no amendment or modification would be binding on the parties unless made 

in writing and signed by each party. 

A. Original Terms of the License 

The License included the following definitions: 

1.2. “ASU’s PATENT RIGHTS” shall mean patent rights to certain 

subject matter, which is included in the following: 

Under ASU Case No. 651: 

U.S. Patent No. 5,635,483 entitled “Tumor Inhibiting Tetrapeptide 

Bearing Modified Phenethyl Amides.” 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 3 of 17
- 4 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

For the purposes of this Agreement, only those compounds taught in 

the above named patent and identified as stereoisomers of a 

compound commonly referred to as “Auristatin E” are included in 

this license and the grant of rights described in Article 2 of this 

Agreement shall pertain only to the following: 

Auristatin E. Compound No. 1S2R 

Auristatin E. Compound No. 1R2R 

Auristatin E. Compound No. 1S2S 

Auristatin E. Compound No. 1R2S 

Each of which falls within the general structure shown below: 

[diagram] 

and any corresponding extensions or foreign applications or patents. 

1.7. “LICENSED PRODUCT” shall mean any material, composition, 

composition of matter, compound, device or embodiment the 

manufacture, use or sale of which would constitute, but for the 

license granted to the LICENSEE pursuant to this Agreement, an 

infringement of any VALID CLAIM contained in ASU’s PATENT 

RIGHTS, as defined herein. For the purposes of this Agreement, 

LICENSED PRODUCT shall include combinations of chemical 

compounds in which a single agent such as Auristatin E is combined 

with another compound such as an antibody. 

The License granted certain rights to SeaGen: 

2.1 ASU hereby grants to LICENSEE an exclusive license in the 

TERRITORY and in the LICENSED FIELD OF USE, which shall 

include the right to grant sub-licenses, under ASU’s PATENT 

RIGHTS, as specified in Paragraph 1.1, to develop, have developed, 

make, have made, market, import, sell, and otherwise use 

LICENSED PRODUCTS and to practice the LICENSED 

METHODS under ASU’s PATENT RIGHTS. 

Article 5 of the License, titled “PAYMENTS AND ROYALTIES,” identified four 

types of payments SeaGen was required to make to ASU: (1) a license issue fee, (2) 

annual maintenance fees, (3) milestone payments, and (4) royalties. First, within ten days 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 4 of 17
- 5 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

of its effective date, the License required SeaGen to pay ASU “a non-refundable Issue 

Fee of $20,000.” Second, the License required SeaGen to pay ASU “an annual 

maintenance fee” “each year until a ‘New Drug [Application]’ (NDA) is received by the 

US Food and Drug Administration,” beginning at $30,000 and increasing by $5,000 each 

year to a maximum of $50,000. SeaGen was not required to pay an annual maintenance 

fee after the U.S. Food and Drug Administration (“FDA”) received a New Drug 

Application. 

Third, the License required SeaGen to make payments to ASU upon achievement 

of four specific clinical development milestones. For example, it required SeaGen to pay 

ASU $250,000 “upon FDA approval of an NDA for a LICENSED PRODUCT that 

constitutes a combination of a single agent such as Auristatin E and another compound 

such as an antibody.” 

Fourth, the License required SeaGen to “pay to ASU an EARNED ROYALTY of 

5.5% of the NET SALES of all LICENSED PRODUCTS” that met certain criteria and 

“an EARNED ROYALTY of 2.0% the NET SALES of all LICENSED PRODUCTS” 

that met different criteria. The License also stated, “The LICENSEE shall pay to ASU an 

earned royalty (‘EARNED ROYALTY’) in accordance with the rules specified in 

Paragraphs 5.4 through 5.14.” 

Paragraph 5.4 required SeaGen to “pay to ASU a minimum annual royalty of 

$50,000 for the life of VALID CLAIMS of ASU’s PATENT RIGHTS (the ‘Minimum 

Annual Royalty’), beginning in the year of LICENSEE’s first receipt of marketing 

approval for a LICENSED PRODUCT” from the FDA. It also required SeaGen to 

“account to ASU and pay royalties to ASU semi-annually within forty-five (45) days 

after the end of each calendar half-year for the just preceding calendar half-year.” It 

required SeaGen to make an additional payment concurrent with its final payment for a 

calendar year “if necessary to meet its obligation to make minimum royalty payments for 

that year.” Paragraph 5.7 stated: 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 5 of 17
- 6 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

“Article 1 defines ASU’s PATENT RIGHTS and LICENSED PRODUCTS 

so that royalties are payable on LICENSED PRODUCTS covered by a 

Valid Claim. EARNED ROYALTIES shall be due on LICENSED 

PRODUCTS in each country where relevant ASU’s PATENT RIGHTS 

exist, for the duration of VALID CLAIMS of such ASU’s PATENT 

RIGHTS in such country. EARNED ROYALTIES shall accrue to ASU 

when LICENSED PRODUCTS are invoiced, or if not invoiced, when 

delivered to a third party and shall be paid as set forth below.” 

Paragraph 5.8 required SeaGen to “pay EARNED ROYALTIES accruing to ASU on a 

semi-annual basis on or before” February 15 and August 15 of each year. 

Article 16 of the License provided for termination by either party for default, 

liquidation, or bankruptcy of the other party. Further, Paragraph 16.3 permitted SeaGen 

to terminate the License without penalty: 

LICENSEE may terminate this Agreement with respect to such LICENSED 

PRODUCT or ASU PATENT RIGHT upon 30 days prior written notice 

with no further obligation to ASU except for the payment of any fees which 

came due or royalties accrued up until the date of termination. 

B. Amendments to the License in 2000 and 2002 

Approximately two weeks after the License was executed in February 2000, the 

parties amended the License. Although the amendment purported to amend Paragraph 

18.1.4, which does not exist, it may have been intended to amend Paragraph 5.1.4 

regarding the dates on which the two installments of the annual maintenance fee were 

due. The original language required payment of the first installment “on the six-month 

anniversary of the EFFECTIVE DATE,” and the amendment required payment of the 

first installment “on the date that is six months after the anniversary of the EFFECTIVE 

DATE.” The original language required payment of the second installment “on the oneyear anniversary of the EFFECTIVE DATE,” and the amendment required payment of 

the second installment “on the date that is one year after the anniversary of the 

EFFECTIVE DATE.” But neither the original License nor the February 2000 

amendment identified what was meant by “the date.” 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 6 of 17
- 7 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

In March 2002, the parties executed a second amendment to the License, which 

stated that SeaGen would pay ASU $50,000 in consideration for entering into the 

amendment. The 2002 amendment postponed deadlines in Paragraphs 8.6.6, 8.6.7, and 

8.6.8 for three of SeaGen’s development obligations under the License and reduced the 

royalty rate for certain licensed products sold by SeaGen’s sub-licensees. Paragraph 

5.3.2 previously required SeaGen to pay ASU “an EARNED ROYALTY of 2.0% of the 

NET SALES of all LICENSED PRODUCTS.” The 2002 amendment required SeaGen 

to pay ASU “an EARNED ROYALTY of 2.0% of the NET SALES of all LICENSED 

PRODUCTS by LICENSEE” for products constituting Auristatin E linked to a molecule 

owned or controlled by SeaGen and an “EARNED ROYALTY” of 1.0% of “NET 

SALES OF LICENSED PRODUCTS by SUBLICENSEES” of products constituting 

Auristatin E linked to a molecule not owned or controlled by SeaGen. 

C. The Parties’ Communications in 2004 Regarding “Amendment No. 3 to 

License Agreement” 

In July 2003, SeaGen sent to ASU a reprint of its first publication about its 

MMAE technology. In April 2004, Eric Dobmeier, SeaGen’s Vice President and General 

Counsel, contacted Brian Martin, representing ASU, regarding a third amendment to the 

License. 

On April 12, 2004, Dobmeier emailed to Martin a document, which he described 

as “summarizing our views on the licensing/patent position for the new cytotoxic 

compounds we have invented, as well as a proposal for restructuring the license 

agreement between SGEN and ASU.” The document stated that SeaGen independently 

invented new chemical compounds such as MMAE, AFP, and MMAF, and it provided 

analysis supporting SeaGen’s conclusion that these compounds “fall outside” the claims 

of the Patent. The document also concluded, “Seattle Genetics does not believe that any 

fees, milestones or royalties are owed to ASU with respect to MMAE, AFP or MMAF or 

other chemical compounds not covered by the Patent.” The document proposed that the 

parties enter into an amendment of the License instead of simply terminating it. SeaGen 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 7 of 17
- 8 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

proposed the following terms for the amendment: (1) SeaGen would pay ASU an annuity 

of $40,000 per year until the Patent either expired or was found invalid; (2) SeaGen 

would not pay ASU any milestones or royalties for MMAE, AFP, MMAF, or any other 

chemical compounds not covered by the Patent; and (3) if SeaGen used or developed any 

compounds covered by the Patent, SeaGen would pay ASU the milestones and royalties 

currently set forth in the License. 

In May 2004, Martin and Peter Slate, representing ASU, spoke with several people 

at SeaGen. Subsequently, on May 13, 2004, Martin emailed Dobmeier, Slate, and others 

to schedule a meeting. Martin stated, “Seattle Genetics is proposing a restructuring of the 

license agreement to reflect the fact that the company is not actively pursuing 

development of the licensed compounds, but is actively pursuing the development of 

derivations/improvement of the licensed compounds.” Martin further stated, “The next 

logical step is [to] have ASU scientists and IP coun[sel] speak with SG’s scientists and IP 

coun[sel] to discuss the rational[e] for why the improved compounds are different from a 

composition of matter standpoint.” 

On June 4, 2004, scientists and counsel from both parties held a telephone 

conference call. They discussed SeaGen’s development of MMAE and MMAF and its 

reasons for no longer developing products included in the License. 

On June 23, 2004, Dobmeier emailed to Martin, Slate, and others a document, 

which he described as “a brief history of Seattle Genetics’ development of MMAE, 

MMAF and other novel auristatin compounds.” Dobmeier asserted that “there were no 

interactions or information flow between [SeaGen]’s chemistry group and ASU regarding 

these compounds.” 

On July 8, 2004, Martin emailed to Dobmeier a proposal for the third amendment 

of the License. It stated that the purposes of the amendment are to “resolve current 

ambiguities” regarding the Patent’s “claim coverage,” recognize the value of the 

relationship between SeaGen and ASU, and recognize the contribution made by ASU’s 

Cancer Research Institute and Dr. G. R. Pettit to SeaGen. It further stated: 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 8 of 17
- 9 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

SGEN’s position is that the compounds MMAE, AFP, and MMAF are not 

covered by the license agreement. The company does not desire to drop the 

license but wants to ensure that ASU does not seek milestones or royalties 

based on the development of the aforementioned compounds. 

AzTE appreciates SGEN’s approach to this matter. However, from AzTE’s 

perspective, there is some remaining ambiguity regarding the claims 

coverage, wording in the license agreement, and SGEN’s assertion that no 

royalties are due on the aforementioned technologies. AzTE does not 

acknowledge that the aforementioned compounds are not covered by 

ASU’s patents, but would be willing to add an amendment stating that these 

compounds are not subject to milestones or royalties, if and only if SGEN 

continues to pay the $50,000 per year in annual maintenance fees as 

required by the existing license and pays an additional $50,000 for the 

amendment terms that clarify the exclusion of the three aforementioned 

compounds. This fee provides ASU with remuneration to compensate for 

the following: the opportunity cost of not licensing the patent claims to 

another entity, the ongoing costs related to patent maintenance which is not 

currently reimbursed by Seattle Genetics, and the contribution made by 

[ASU’s Cancer Research Institute] and Dr. G. R. Pettit. 

ASU’s July 8, 2004 draft proposed that SeaGen continue to pay $50,000 in annual 

maintenance fees and also pay an additional $50,000 in annual fees to maintain the 

license even though SeaGen did “not foresee significant development of the licensed 

compounds.” The draft also stated, “ASU’s PATENT RIGHTS and LICENSED 

PRODUCTS do not include the chemical compounds MMAE, AFP, and MMAF and as 

such, the development of these compounds is not subject to milestones or royalties as 

dictated by the existing license agreement.” 

On July 28, 2004, Martin sent Dobmeier another draft of the proposed 

amendment, which differed from the July 8 draft in that it provided that the annual fee 

would begin at $20,000 and increase $5,000 per year until it reached $50,000 rather than 

setting the annual fee at $50,000 from the beginning. It also required SeaGen to 

reimburse ASU for “any and all ongoing patent costs related to ASU case 651.” In his 

email, Martin told Dobmeier, “I think this is a fairly cheap insurance policy for SGEN, 

knowing that the company has the rights tied up for this compound and the other related 

compounds that your [sic] are advancing in clinical stages.” 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 9 of 17
- 10 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

On July 29, 2004, Dobmeier proposed to Martin eliminating the provision that 

SeaGen pay patent costs and instead increase the annual payments to yield the $200,000 

in additional value that ASU sought as consideration for the proposed amendment. 

Dobmeier stated, “Since we believe we’re not covered by ASU’s patent and we only 

licensed a few claims from a patent that I’m guessing has more than 25 claims, it doesn’t 

seem fair for us to reimburse all patent costs.” In response, Martin offered to drop the 

patent costs in exchange for a one-time payment of $30,000 in addition to the annual fee 

of $50,000 and subsequent annual fees beginning at $60,000 and increasing by $5,000 

each year to a maximum of $100,000. Martin referred to this payment schedule as “a 

reasonable value given the assurances you’re looking for and the opportunity cost for us.” 

On August 3, 2004, following up on a conversation the previous day, Dobmeier 

emailed Martin some examples of MMAE/MMAF prodrug structures. Dobmeier said 

that these prodrugs were “not a very active research area at Seattle Genetics, but 

including them within the amendment is a way to sell the financial terms internally to 

management so we can get this done.” Dobmeier stated that SeaGen would agree to the 

payments proposed by Martin on July 29 if ASU agreed to include these prodrugs within 

the amendment. 

On August 5, 2004, Martin emailed two ASU individuals, informing them that 

“we are in negotiation with Seattle Genetics to sign an amendment that says we don’t 

have rights (and therefore won’t receive royalties) on the three new compounds that 

Seattle Genetics developed,” and “we’ve decided to sign an agreement that states ASU 

won’t receive royalties or milestones based on the development of those 3 new 

compounds and the prodrug versions of those drugs.” 

On August 6, 2004, one of the ASU individuals relayed a response to Martin from 

Dr. Pettit that the proposed agreement was “a bad deal” and that they needed “a not to sue 

agreement with a 2% royalty and no decrease in the Seattle Genetics payments/year.” 

The response also stated that “the new compounds are very close to auristatin E” and 

SeaGen had benefited from ASU’s knowledge in the auristatin-dolastatin area. 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 10 of 17
- 11 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Later on August 6, 2004, Dobmeier emailed to Martin a draft document titled 

“Amendment No. 3 to License Agreement.” Dobmeier stated, “In addition to the terms 

we’ve discussed, you’ll note that I’ve made a few clarifications/deletions in the 

amendment to account for the fact that the diligence clauses in Article 8 and the technical 

assistance provisions of Article 14 aren’t applicable in the current context.” Paragraph 1 

of the Agreement section of this draft, which is same as in the final version of 

Amendment No. 3, states: 

ASU acknowledges and agrees that ASU’s PATENT RIGHTS do not 

cover: (a) MMAE, MMAF and AFP (each as defined in Exhibit A); and 

(b) any prodrug forms of MMAE, MMAF and AFP (collectively, “SGI 

COMPOUNDS”). ASU acknowledges and agrees that the LICENSEE will 

not pay ASU any milestones or royalties with respect to products utilizing 

or incorporating SGI COMPOUNDS or any variants, analogues or 

derivatives thereof (collectively, “INDEPENDENT PRODUCTS”). 

On August 16, 2004, Martin responded to Dobmeier with a redlined document 

showing Martin’s revisions to Dobmeier’s draft. Martin said, “Our IP attorney is going 

to give the document one last look this afternoon.” A few hours later, Martin emailed 

Dobmeier conveying feedback from the attorney, which noted three typographical errors 

and a discrepancy between the diagrams for MMAE, AFP, and MMAF in SeaGen’s 

original proposal and those in the proposed Amendment No. 3. The attorney explained 

that by using straight lines instead of triangles, the proposed Amendment No. 3 defined 

the compounds MMAE, AFP, and MMAF, more broadly than the original proposal, 

which limited the compounds to a certain stereochemistry (i.e., spatial arrangement of 

atoms and groups in molecules). Martin requested that Dobmeier correct the 

typographical errors and revise the diagrams to “exactly replicate the stereochemistry of 

the first document.” 

On August 17, 2004, Dobmeier emailed to Martin a redlined version of the 

proposed Amendment No. 3 showing the revisions they had discussed and a few 

additional corrections. Dobmeier requested that Martin provide specific authorization 

language, and a few minutes later Martin responded with language to be inserted. Shortly 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 11 of 17
- 12 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

thereafter, Dobmeier emailed to Martin a final execution copy of Amendment No. 3 and 

requested that Martin fax to him the page with ASU’s signature. 

D. Amendment No. 3 to the License in 2004 

Effective August 17, 2004, the parties executed “Amendment No. 3 to License 

Agreement,” amending License Agreement No. 651-01.LLC dated February 3, 2000, as 

subsequently amended on February 18, 2000, and March 14, 2002. Amendment No. 3 

provided that “all capitalized terms used but not defined herein” had the meanings set 

forth in the License as amended in 2000 and 2002. 

Paragraph 1 of Amendment No. 3 stated: 

ASU acknowledges and agrees that ASU’s PATENT RIGHTS do not 

cover: (a) MMAE, MMAF and AFP (each as defined in Exhibit A); and 

(b) any prodrug forms of MMAE, MMAF and AFP (collectively, “SGI 

COMPOUNDS”). ASU acknowledges and agrees that the LICENSEE will 

not pay ASU any milestones or royalties with respect to products utilizing 

or incorporating SGI COMPOUNDS or any variants, analogues or 

derivatives thereof (collectively, “INDEPENDENT PRODUCTS”). 

Paragraph 3 of Amendment No. 3 required SeaGen to pay ASU a one-time fee of 

$30,000 and increased the total of the annual maintenance fees due in 2005 through 2014 

from $500,000 to $820,000. Paragraph 4 deleted SeaGen’s due diligence and marketing 

obligations and ASU’s technical assistance obligations. It also provided that 

requirements for milestone payments, earned royalties, and progress reports would “apply 

only to LICENSED PRODUCTS, and not INDEPENDENT PRODUCTS.” Paragraph 5 

of Amendment No. 3 provided that, except as otherwise expressly modified by 

Amendment No. 3, the License remained in full force and effect in accordance with its 

terms. 

E. Subsequent History 

After 2004, the parties communicated occasionally regarding SeaGen’s 

development of ADCETRIS, an anticancer drug that uses MMAE. In August 2011, 

SeaGen obtained accelerated FDA approval to market and sell ADCETRIS. In July 

2013, the parties settled disputes pending before the Arizona Superior Court, American 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 12 of 17
- 13 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Arbitration Association, and the U.S. District Court for the Western District of 

Washington. The settlement expressly did not affect ASU’s ability to assert a claim of 

patent infringement or SeaGen’s ability to assert defenses to such a claim. On March 31, 

2014, ASU filed the present lawsuit alleging infringement of the Patent. The Patent 

expired in 2014. 

IV. ANALYSIS 

If at all possible, a court must attempt to enforce a contract according to the 

parties’ intent at the time the contract was made. Taylor v. State Farm Mutual Auto. Ins. 

Co., 175 Ariz. 148, 152-53, 854 P.2d 1134, 1138-39 (1993). The court first considers 

evidence alleged to illuminate the meaning of the contract language or determine the 

parties’ intent and then excludes extrinsic evidence that would vary or contradict the 

meaning of the written words of an agreement. Id. The court need not determine that the 

contract is ambiguous to consider extrinsic evidence. Id. 

SeaGen contends that because ASU agreed SeaGen would not pay any royalties 

for using MMAE, ASU cannot sue SeaGen for royalties for using MMAE, and therefore 

SeaGen cannot be liable for infringement of the Patent by using MMAE. ASU contends 

it agreed SeaGen would not pay milestones and royalties under the License for using 

MMAE because Amendment No. 3 excludes MMAE from the License, but it did not 

waive compensation outside of the License for SeaGen’s use of MMAE. Whether 

SeaGen can be held liable to ASU for infringement turns on whether ASU agreed to 

accept $850,000 in exchange for forgoing speculative future compensation related to 

MMAE or SeaGen agreed to pay $850,000 for no real benefit. 

In March 2002, SeaGen agreed to pay ASU $50,000 to amend the License to 

postpone deadlines for three of SeaGen’s development obligations and to reduce the 

royalty rate for sale of licensed products by SeaGen’s sub-licensees. By 2004, SeaGen 

no longer was actively pursuing development of the licensed products and could have 

simply terminated the License. Instead, SeaGen offered ASU compensation in exchange 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 13 of 17
- 14 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

for certainty about using MMAE, which it believed was not protected by the Patent and 

not covered by the License. 

In April 2004, SeaGen explained to ASU why it believed MMAE was not covered 

by the Patent and SeaGen would not owe ASU any compensation for MMAE products. 

SeaGen told ASU that rather than terminate the License, it would prefer to amend it to 

reduce SeaGen’s annual fees and ensure that SeaGen would not pay ASU any milestones 

or royalties for MMAE. SeaGen’s obligation to pay milestones and royalties for licensed 

products would continue unchanged. In May 2004, Martin of ASU described SeaGen’s 

proposal as a “restructuring of the license agreement” because SeaGen was not 

developing the licensed products and instead was developing an improvement of the 

licensed products. 

In June 2004, SeaGen provided ASU more information about its independent 

development of MMAE, and both parties’ scientists and IP counsel discussed MMAE 

and its relationship to the licensed products. In July 2004, although ASU was unwilling 

to acknowledge that its patents do not cover MMAE, it described the question of patent 

coverage as “some remaining ambiguity regarding the claims coverage.” During the 

exchange of drafts, the parties focused primarily on how much SeaGen was going to pay 

ASU in exchange for an “insurance policy.” In August 2005, ASU’s internal 

communications acknowledged it intended to sign an agreement stating it did not have 

rights to MMAE and would not receive royalties based on development of MMAE. Even 

if ASU believed there was more than “some remaining ambiguity” regarding whether the 

Patent covered MMAE, it knew that SeaGen obtaining FDA approval for a product using 

MMAE before the Patent expired in 2014 was unlikely. It would have been reasonable 

for ASU to choose guaranteed payments totaling $850,000 rather than gamble on the 

possible benefit of leaving “some remaining ambiguity” unresolved. 

It also would have been reasonable for SeaGen to pay $850,000 to resolve any 

“remaining ambiguity” regarding whether ASU would seek compensation for SeaGen’s 

use of MMAE. There is no evidence showing the parties intentionally used the term 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 14 of 17
- 15 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

“milestones and royalties” to protect SeaGen from any claim by ASU for payments under 

the License and to leave SeaGen vulnerable to infringement damages outside of the 

License. There also is no evidence showing SeaGen wanted to mislead its development 

partners by saying it had no obligation to pay ASU royalties related to MMAE “under the 

License,” all the while knowing that ASU could demand compensation related to MMAE 

outside of the License. Finally, there is no evidence showing that SeaGen wanted to be 

relieved of its obligation to develop certain products while maintaining exclusive rights to 

those products to prevent competitors from developing those products. 

Consideration of evidence extrinsic to Amendment No. 3 yields an interpretation 

that does not vary or contradict the meaning of the written words of Amendment No. 3. 

Amendment No. 3 states, “ASU acknowledges and agrees that the LICENSEE will not 

pay ASU any milestones or royalties with respect to products utilizing or incorporating 

SGI COMPOUNDS. . . .” Amendment No. 3’s definition of “SGI COMPOUNDS” 

includes MMAE. Amendment No. 3 therefore plainly states that SeaGen will not pay 

ASU any royalties for its use of MMAE. It does not say “royalties under the License.” It 

does not reserve any rights against SeaGen that ASU may have had under the License or 

the Patent regarding MMAE. It anticipates that SeaGen will develop and market 

products using MMAE and does not impose any obligation on SeaGen for doing so. 

By executing Amendment No. 3, the parties entered a business deal intended to 

provide certainty. ASU obtained guaranteed revenue by forgoing potential income from 

an undeveloped product that may not have been covered by the Patent and likely would 

not achieve FDA approval before the Patent expired. SeaGen obtained certainty that it 

had no obligation to ASU beyond paying $850,000. The deal should have avoided costly 

litigation for both parties. Therefore, SeaGen’s Motion for Summary Judgment will be 

granted. 

V. REMAINING MOTIONS AND SEAGEN’S COUNTERCLAIM 

The foregoing analysis resolves in SeaGen’s favor the first issue ASU raised in its 

Motion for Partial Summary Judgment regarding the merits of SeaGen’s license-based 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 15 of 17
- 16 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

defense and counterclaim. ASU’s challenges to SeaGen’s legal estoppel defense, waiver 

defense, counterclaim for breach of the implied covenant of good faith and fair dealing, 

laches and other delay-related defenses, equitable estoppel defense, and allegations of 

inequitable conduct are now moot. Therefore, ASU’s Motion for Partial Summary 

Judgment (Docs. 293 (redacted), 299 (sealed)), will be denied. 

The parties also have filed, in both sealed and redacted versions, ten motions to 

strike expert testimony, damages claims, and laches-related defenses. During oral 

argument, counsel for each party stated that these ten motions do not affect resolution of 

the summary judgment motions. All of these motions will be denied as moot. 

In its counterclaim SeaGen seeks declaratory judgment that it has not infringed 

any claim of the Patent, declaratory judgment that the Patent is invalid, and determination 

that ASU breached the implied covenant of good faith and fair dealing. The counterclaim 

essentially restates SeaGen’s defenses, which are moot upon granting SeaGen summary 

judgment. SeaGen also prematurely seeks determination that this is an exceptional case 

for award of attorney fees under 35 U.S.C. § 285. Consideration of any request for 

attorney fees will be made in accordance with the Fed. R. Civ. P. 54(d) and LRCiv 54.2. 

IT IS THEREFORE ORDERED that SeaGen’s Response to ASU’s Supplemental 

Statement of Facts (Docs. 398 (redacted) and 416 (sealed)) is stricken as not authorized 

by the Rules of Practice of the U.S. District Court for the District of Arizona. 

IT IS FURTHER ORDERED that Defendant Seattle Genetics, Inc.’s Motion for 

Summary Judgment (Docs. 256 (redacted), 310 (sealed)) is granted. 

IT IS FURTHER ORDERED that ASU’s Motion for Partial Summary Judgment 

(Docs. 293 (redacted), 299 (sealed)) is denied. 

IT IS FURTHER ORDERED that all remaining pending motions in this case are 

denied as moot. 

IT IS FURTHER ORDERED that Seattle Genetics’ Counterclaim (Doc. 10) is 

dismissed as moot. 

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 16 of 17
- 17 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Defendant 

and against Plaintiff and that Plaintiff take nothing. The Clerk shall terminate this case. 

Dated this 4th day of August, 2015. 

Neil V. Wake

United States District Judge

Case 2:14-cv-00653-NVW Document 444 Filed 08/04/15 Page 17 of 17