In the

United States Court of Appeals

For the Seventh Circuit

Nos. 08-1351 & 06-3901

WISCONSIN ALUMNI RESEARCH FOUNDATION,

Plaintiff-Appellee/

Cross-Appellant,

v.

XENON PHARMACEUTICALS, INC.,

Defendant-Appellant/

Cross-Appellee.

Appeals from the United States District Court

for the Western District of Wisconsin.

No. 05 C 242—Barbara B. Crabb, Chief Judge.

ARGUED DECEMBER 8, 2008—DECIDED JANAURY 5, 2010

Before EASTERBROOK, Chief Judge, and BAUER and

SYKES, Circuit Judges.

SYKES, Circuit Judge. This case arises out of a complex

set of contractual relationships between the Wisconsin

Alumni Research Foundation, the patent-management

entity for the University of Wisconsin; certain research
2 Nos. 08-1351 & 06-3901

scientists at the University; and Xenon Pharmaceuticals, a

Canadian drug company. The Foundation and Xenon

jointly own the patent rights to an enzyme that can lower

cholesterol levels in the human body. The enzyme’s

cholesterol-reducing benefits were discovered and confirmed by scientists at the University whose research

was sponsored in part by Xenon. In 2001, pursuant to an

option agreement between the Foundation and Xenon,

the Foundation gave Xenon an exclusive license to commercialize this discovery and market any resulting products in exchange for a share of the profits.

The Foundation brought this suit against Xenon

alleging violations of its contract rights and seeking

damages and declaratory relief. First, the Foundation

alleged that Xenon sublicensed its interest in the patented

enzyme to a third party but refused to pay the Foundation a percentage of the sublicense fees as required under

the 2001 license agreement. Second, the Foundation

alleged that Xenon wrongly asserted ownership over a

set of therapeutic compounds developed from the jointly

patented enzyme; the Foundation claimed that it owned

rights to these compounds pursuant to its network of

written agreements with Xenon and the University researcher who confirmed the therapeutic benefits of the

compounds. Xenon counterclaimed against the Foundation, and on cross-motions for summary judgment,

the district court ruled in the Foundation’s favor on the

breach-of-contract claim and in Xenon’s favor on the

dispute over ownership of the compounds. A jury awarded

$1 million in damages for the breach of contract; the

Foundation accepted $300,000 after Xenon successfully

moved for remittitur. Both parties appealed.
Nos. 08-1351 & 06-3901 3

We affirm in part and reverse in part and remand

for entry of judgment consistent with this opinion. The

district court properly granted summary judgment for

the Foundation on the breach-of-contract claim. Xenon

breached its license agreement with the Foundation by

granting a sublicense in the jointly patented enzyme to a

third party without paying the Foundation its share of

the sublicense fees. A subsidiary issue is whether

Xenon’s breach triggered the Foundation’s right to terminate the agreement. We conclude that the district court

should not have voided the Foundation’s attempt to

do so; the Foundation was entitled to and properly terminated the agreement. We also conclude the district court

erroneously entered judgment for Xenon on the issue of

the Foundation’s claim to an ownership interest in the

compounds. Under the web of contracts at issue here,

the Foundation was entitled to a declaration of its ownership interest in the compounds.

I. Background

Researchers at the University of Wisconsin became

interested in an enzyme called Stearoyl CoA Desaturase

(“SCD”) because of its potential to help treat diabetes,

obesity, and other diseases by lowering cholesterol. In

1999 the researchers discovered that suppressing SCD

levels in the human body lowered cholesterol levels.

Pursuant to University policy, the researchers disclosed their research results to the Foundation and in

January 2000 signed a Memorandum Agreement

assigning all their rights in the discovery to the Founda-
4 Nos. 08-1351 & 06-3901

The joint research program ran into problems in November 1

2002 when Xenon and the University became embroiled in a

funding dispute. The University claimed that Xenon had

fallen behind on payments for the sponsored research, and as

a result the University had to turn to federal funds to fill the

gap. Xenon denied that it owed the University any additional

money. A year later, Xenon and the University settled this

dispute and signed a Settlement and Release Agreement.

tion. The next month, the Foundation filed a provisional

patent application for the discovery.

Meanwhile, Xenon, a Canadian pharmaceutical

company that was collaborating with the University on

research into a separate enzyme, learned of the University’s discoveries and expressed interest in jointly

pursuing SCD research. The University and Xenon

entered into a series of research agreements (referred to

as Research Agreements 1, 2, and 3) in which Xenon

agreed to jointly sponsor various SCD research projects

with the University. Each research agreement identified

the scope of the research, the principal researcher, the

expected cost, and the period of performance. These 1

agreements also referred to a separate Sponsor Option

Agreement between the Foundation and Xenon that

governed ownership of any discoveries arising from the

joint research program. The Sponsor Option Agreement

cross-referenced the contracts between the Foundation

and the individual University researchers requiring the

researchers to assign to the Foundation any property

rights in the discoveries emanating from the research and

gave Xenon an exclusive option to license any resulting
Nos. 08-1351 & 06-3901 5

The Sponsor Option Agreement was executed in February 2

2000 but backdated to September 1999.

technology. Attached to the Sponsor Option Agreement

2

were the individual contracts between the Foundation

and the University researchers.

At the same time that Xenon signed its first research

agreement with the University, Xenon also entered into

a series of short-term consulting agreements with individual researchers at the University who worked on SCD

projects. In exchange for consulting fees, these scientists

undertook specific research projects for Xenon and agreed

to assign any discoveries arising from these consulting

projects to Xenon.

In February 2001 Xenon and the Foundation filed a

joint patent application deriving from the provisional

patent application the Foundation had filed in 2000. The

application covered, among other things, the SCD enzyme

itself and a method (called an assay) of using the enzyme

to identify compounds that lower SCD levels. A patent

issued for the assay, but the patent application covering

the remaining claims is still pending. Also in

February 2001, Xenon exercised its option under the

Sponsor Option Agreement to an exclusive license for

any discoveries arising from the Xenon-sponsored SCD

research at the University. As a result Xenon and the

Foundation entered into an Exclusive License Agreement giving Xenon an exclusive right to make, use, and

sell patented products under the joint patent application

within the field of human healthcare. In exchange for
6 Nos. 08-1351 & 06-3901

these exclusive rights, Xenon agreed to pay the Foundation a percentage of any product sales, royalties, or

sublicense fees it received.

After receiving the exclusive license, Xenon worked

with Discovery Partners, Inc., to help identify compounds

that inhibit the SCD enzyme. Using the jointly patented

assay, Discovery Partners screened thousands of compounds and identified a set of 20 (referred to as the PPA

compounds) with the potential to suppress SCD levels.

Xenon shipped the PPA compounds to Mark Gray-Keller,

a University researcher with whom it had a consulting

agreement, for confirmatory testing. Gray-Keller successfully confirmed the inhibitory potential of the PPA compounds and thereafter assigned any interest he had in

the compounds to Xenon. In 2002 Xenon filed a patent

application covering the PPA compounds.

The Foundation objected, claiming that it had an ownership interest in the PPA compounds under the various

interlocking agreements among the parties. More specifically, the Foundation noted that Gray-Keller had

assigned all his rights in SCD discoveries and any improvements to the Foundation in his 2000 Memorandum Agreement. The Foundation also noted that the Sponsor Option

Agreement between it and Xenon specifically acknowledged that Gray-Keller was required to assign his

interest in any inventions arising from the jointly sponsored research to the Foundation. Alternatively, the

Foundation claimed it had title to the compounds under

the Bayh-Dole Act, 35 U.S.C. §§ 200 et seq., because

federal funds had been used in the research and development of the compounds.
Nos. 08-1351 & 06-3901 7

Relations between Xenon and the Foundation continued to deteriorate in 2004 when Xenon signed a

license agreement with Novartis Pharma AG (“Novartis”),

a Swiss corporation. This agreement gave Novartis a

license to the technology covered by the joint patent

application and purported to transfer ownership of the

PPA compounds. After learning of this agreement (via a

press release), the Foundation demanded a percentage

of the sublicense fees from Xenon under the terms of the

Exclusive License Agreement. Xenon refused, claiming it

had the right to license its undivided interest in the joint

patent application without being subject to the terms of

its license agreement with the Foundation.

The Foundation then brought this suit claiming that

Xenon violated the terms of the Exclusive License Agreement and owed the Foundation a percentage of the

sublicense fees it received from Novartis. The Foundation

also claimed that it, not Xenon, owned Gray-Keller’s

interest in the PPA compounds. The Foundation sought

damages and declaratory judgment. Xenon responded

with counterclaims against the Foundation. The district

court, on cross-motions for summary judgment, entered a

series of rulings on all issues except damages. The

judge held that Xenon breached the Exclusive License

Agreement by granting a sublicense to Novartis without

notifying the Foundation or conforming the sublicense

to the terms set out in the license agreement. The judge

also held that Xenon owed royalties or sublicense fees

to the Foundation under the terms of the license agreement. The judge further held that in light of Xenon’s

breach, the Foundation had a right to terminate the

license agreement.
8 Nos. 08-1351 & 06-3901

The court also ruled in Xenon’s favor on several issues.

First, the judge dismissed as moot the Foundation’s claim

that Xenon breached its duty of good faith by failing to

abide by the terms of the license agreement. Second, the

judge held that the Foundation had not given Xenon

proper notice or an opportunity to cure before invoking

its right to terminate the license agreement. Third, the

court denied the Foundation’s claims to quiet title in

the PPA compounds, for conversion of those same compounds, and for a declaratory judgment that GrayKeller’s purported assignment of his rights in the compounds to Xenon was void. The court held that the Foundation could not claim title to the compounds under

either the Memorandum Agreement with Gray-Keller, the

Sponsor Option Agreement with Xenon, or the Bayh-Dole

Act. Later, the court vacated its ruling regarding the

Foundation’s right to terminate the license agreement;

the judge agreed with Xenon that the Foundation had

not properly developed this argument in its opening

summary-judgment brief.

The case proceeded to a jury trial on the question of

damages for Xenon’s failure to pay royalties or

sublicense fees. The jury awarded $1 million, but on

Xenon’s motion for remittitur the court reduced the

award to $300,000, which the Foundation accepted. The

parties cross-appealed from the judgment, challenging

various of the district court’s rulings on summary judgment; Xenon also challenges the sufficiency of the

evidence on damages.
Nos. 08-1351 & 06-3901 9

II. Discussion

We review the district court’s grant of summary judgment de novo. Clancy v. Geithner, 559 F.3d 595, 599 (7th

Cir. 2009). Summary judgment is appropriate when there

is no genuine issue of material fact and the moving party

is entitled to judgment as a matter of law. See FED. R. CIV.

P. 56(c). On review of cross-motions for summary judgment, we view all facts and inferences in the light most

favorable to the nonmoving party on each motion. See

Tate v. Long Term Disability Plan for Salaried Employees of

Champion Int’l Corp. #506, 545 F.3d 555, 559 (7th Cir.

2008). For organization and ease of discussion, we divide

the issues on appeal into two groups: (1) those that relate

to the rights of the parties under the Exclusive License

Agreement, and (2) those that relate to the rights of the

parties regarding the PPA compounds. 

A. Exclusive License Agreement

1. Xenon’s Transfer of Rights to Novartis

We begin by addressing Xenon’s contention that it did

not violate the terms of the Exclusive License Agreement when it licensed its interest in the joint patent

application to Novartis without paying the Foundation

its share of the licensing fee. As a threshold matter, Xenon

argues that this dispute is resolved by federal patent law,

not by contract law. The district court did not address

the question whether Xenon retained a federal statutory

right to freely license its interest without regard to the

Foundation’s contract rights. The court resolved the
10 Nos. 08-1351 & 06-3901

parties’ disputes based solely on the terms of their

various contracts, holding that Xenon effectively executed

a sublicense with Novartis and that this transaction

fell within the provision of the Exclusive License Agreement governing sublicenses. Xenon contends that federal

law—specifically, 35 U.S.C. § 262—gives it the right to

freely license its undivided one-half interest in the joint

patent application without accounting to the Foundation

under the terms of the Exclusive License Agreement.

We disagree.

Federal law provides that joint patent owners, like the

Foundation and Xenon, have control over the entire

property, and each co-owner may freely use the

patented technology without regard to the other. See 35

U.S.C. § 262. We have previously observed that under

this principle of patent law, “each co-owner is ‘at the

mercy’ of the other in that the right of each to license

independently ‘may, for all practical purposes, destroy

the monopoly and so amount to an appropriation of the

whole value of the patent.’ ” Rail-Trailer Co. v. ACF Indus.,

Inc., 358 F.2d 15, 17 (7th Cir. 1966) (quoting Talbot v.

Quaker-State Oil Ref. Co., 104 F.2d 967, 968 (3d Cir. 1939)).

This statutory rule is subject to an important exception,

however: Joint patent owners may vary their rights by

contract. The statute provides that “[i]n the absence of any

agreement to the contrary, each of the joint owners of a

patent may make, use, offer to sell, or sell the

patented invention . . . without the consent of and without

accounting to the other owners.” 35 U.S.C. § 262 (emphasis

added). The statutory default rule therefore controls

unless there is an agreement to the contrary.
Nos. 08-1351 & 06-3901 11

The Exclusive License Agreement states: “This Agreement is 3

not assignable by either party except with the prior written

consent of the other party, which consent shall not be unreasonably or arbitrarily withheld.”

Here, the Foundation and Xenon modified the

statutory default rule by contract; the Exclusive License

Agreement plainly qualifies as “an agreement to the

contrary” for purposes of § 262. That agreement provides:

“[The Foundation] hereby grants to Xenon an exclusive

license, limited to the [field of human healthcare,] . . .

under the Licensed Patents to make, use and sell Products.” In exchange Xenon agreed to pay the Foundation a

percentage of any payments, royalties, or sublicense fees

it received by commercializing the technology itself or

sublicensing the technology to a third party to commercialize. Under the terms of the agreement, sublicenses

are expressly permitted—provided Xenon pays the Foundation the specified percentage of any royalties or sublicense fees—but assignments are prohibited without the

Foundation’s prior written consent.3

Xenon argues that nothing in the Exclusive License

Agreement explicitly revokes its statutory right to license

its interest freely. True, but the agreement’s provision

requiring that Xenon pay the Foundation a share of the

fees derived from any sublicense plainly undermines

Xenon’s claim that it retained an unfettered right under

§ 262 to transfer its interest in the technology to third

parties. So does the agreement’s provision prohibiting

assignment of the license without the Foundation’s con-
12 Nos. 08-1351 & 06-3901

sent. The bargained-for exchange between the parties

provided that the Foundation would forego its right to

separately license the patent in exchange for receiving a

share of the profits from Xenon’s commercialization of

the technology—either directly or via a sublicense to a

third party. Xenon received a significant benefit from

the agreement—the exclusive right to exploit the technology protected by the joint patent application. Xenon

cannot avoid paying royalties or sublicense fees to the

Foundation simply by labeling the Novartis transaction

a “license” rather than a “sublicense.”

Accordingly, the terms of the Exclusive Licensing

Agreement, not 35 U.S.C. § 262, govern the parties’ rights

and responsibilities here. Under that agreement Xenon

held an exclusive license to develop the SCD discovery

for commercial purposes and a corresponding obligation

to share proceeds with the Foundation. The agreement

gives Xenon three options: (1) commercialize the technology directly and pay royalties to the Foundation;

(2) sublicense the technology to a third party and pay a

percentage of the sublicense fees to the Foundation; or

(3) assign its exclusive licensing rights to a third party

with the prior consent of the Foundation.

Xenon suggests in the alternative that it never actually

gave Novartis a license to the Foundation’s interest in the

jointly patented technology. The district court properly

rejected this argument. The Xenon-Novartis agreement

provides that Xenon grants to Novartis an exclusive

license to all Xenon technology in the field of human

and animal healthcare. Xenon technology includes “Xe-
Nos. 08-1351 & 06-3901 13

non’s interest in all Patent Rights in the Field, as specifically described in Schedule B,” and Schedule B prominently lists the joint patent application owned by Xenon

and the Foundation—first out of four listed patents. Xenon

argues unpersuasively that the phrase “patent rights” does

not include rights it obtained through the Exclusive

License Agreement. In the warranty clause of the XenonNovartis agreement, Xenon represents that “it is the

owner or licensee of all rights, title and interest in and to

the Xenon Patent Rights.” (Emphasis added.) Accordingly, Xenon granted Novartis any interest it held

in the joint patent application by specifically including it

in Schedule B. Put another way, Xenon effectively

sublicensed its exclusive license rights in the jointly

patented technology. The district court correctly concluded that the Xenon-Novartis agreement is subject to

the terms of the Exclusive License Agreement governing

sublicenses.

2. Sublicense Fees 

After concluding that Xenon granted Novartis a

sublicense in the jointly patented technology, the district

court held that Xenon violated the terms of the Exclusive

License Agreement by failing to pay the Foundation a

share of the sublicense fees. Xenon argues that it is not

obligated to make payments to the Foundation until

products are actually brought to market and sold as a

result of the sublicense. Because no products have yet

been sold, Xenon claims it does not owe the Foundation

anything. Again, we disagree. The Exclusive License
14 Nos. 08-1351 & 06-3901

Technically, the contract stipulates that Xenon must pay the 4

Foundation on a quarterly basis, as specified in Section 4(E)(i)

of the Exclusive License Agreement.

Agreement requires Xenon to pay the Foundation license

fees, milestones, and royalty payments as soon as they

are received.4

Section 4 of the Exclusive License Agreement, titled

“Consideration,” lays out the payment details and schedule. Subsection (B)(i) of that section states: “For all Products sold directly by Xenon, Xenon shall pay to [the Foundation] . . . a royalty calculated as a percentage of the Selling

Price of Products . . . .” (Emphasis added.) It goes on to

specify that royalties are earned on either the date the

product is actually sold, the date an invoice is sent, or

the date the product is transferred to a third party for

promotional reasons—whichever comes first. The next

subsection—the provision most relevant to this dispute—states:

For all Products sold by Xenon sublicensees, Xenon

shall pay to [the Foundation] a percentage of any

license fees, milestones, and royalty payments

received by Xenon as consideration for the sublicense

granted to such sublicensees under Section 2B. The

percentage shall remain fixed at a rate of ten percent

(10%) for years one (1) and two (2) of this Agreement

and seven and one-half percent (7.5%) thereafter

until this Agreement is terminated.

Because both subsections begin with the phrase “[f]or all

Products sold” (emphasis added), Xenon argues that it
Nos. 08-1351 & 06-3901 15

does not owe the Foundation any payments for the

Novartis sublicense until products are actually brought

to market and sold.

We agree with the district court that Section 4, read as a

whole, requires payment of the Foundation’s share of

the sublicense fee independent of any actual sales of

products. The apparent point of the prefatory phrase “[f]or

all Products sold” in each of the two subsections

governing payment is to distinguish between payments

required when Xenon commercialized the technology

itself and payments required when Xenon issued a

sublicense to a third party to do so. In the former circumstance, the payment due the Foundation is a royalty

based on products sold; in the latter circumstance, the

payment due the Foundation is a specified percentage

of the sublicense fee Xenon receives, plus “milestones” and

royalties. Because the Novartis transaction falls under

the second subsection, payment is due on receipt of a

sublicense fee, not on the occurrence of product sales.

This reading of the payment provision is the most

plausible for several reasons. Although both subsections

use the same introductory phrase, the first subsection

also says that payment is due upon actual product sale

while the second subsection—governing sublicenses—does

not include similar language. Instead, the second subsection states that Xenon owes the Foundation a

percentage of any license fees and “milestones,” in addition to royalty payments, stemming from any sublicense. As the district court noted, sublicense fees and

milestone payments are not contingent upon a sale; they
16 Nos. 08-1351 & 06-3901

After concluding that Xenon breached the Exclusive License 5

Agreement, the district court dismissed the Foundation’s

claim for breach of the implied duty of good faith as moot. The

Foundation claims this was error. It was not. Under Wisconsin

law a duty of good faith is implied in every contract. See

Market Street Assocs. Ltd. P’ship v. Frey, 941 F.2d 588, 592 (7th

Cir. 1991) (applying Wisconsin law). But because Xenon is liable

for breach of the license agreement’s express terms, there is

no reason to resort to—or separate factual basis to support—a

claim for breach of the implied duty of good faith.

are paid immediately or on an ongoing basis by a

licensee or sublicensee in exchange for the right to make

sales of products developed in the future. Finally, the

parties agree that it generally takes about 15 years to

bring a drug product to market. Yet the Exclusive

License Agreement specifies that Xenon must pay the

Foundation 10% of any license fees, milestones, and

royalty payments received during the first two years of

the agreement and 7.5% thereafter. This provision would

make little sense if no payment was required on

a sublicense until a product was brought to market.

Accordingly, the district court properly concluded that

Xenon breached the Exclusive Licensing Agreement by

failing to pay the Foundation its share of the fee from

the Novartis transaction.5

3. Damages

The district court entered summary judgment on liability; damages were tried to a jury. Xenon’s agreement
Nos. 08-1351 & 06-3901 17

While the district court concluded that Xenon owned the 6

PPA compounds, it also held that the PPA compounds fell

under the terms of the Exclusive License Agreement and that

Xenon owed the Foundation fees for these compounds as

well. We need not address the apparent incongruity in these

conclusions; the jury made no award for the portion of the

sublicense fee that included the PPA compounds. Moreover, as

we explain, infra pp. 24-28, we are reversing the district court’s

determination that the Foundation had no ownership interest

in the compounds. 

with Novartis purported to grant a license to: (1) the joint

patent agreement; (2) the PPA compounds; (3) several

other patent applications; and (4) Xenon’s “know-how.”

Novartis paid Xenon $4 million in cash and another

$11 million in stock as part of a separate Stock Purchase

Agreement signed the same day. The question for the

jury was how much of this fee was payment for the jointpatent-agreement sublicense and the PPA compounds

as opposed to the other pieces of the package. As we 6

have noted, the Exclusive License Agreement stipulated

that the Foundation should receive 7.5% of “any license

fees, milestones, and royalty payments received by

Xenon as consideration for the sublicense.” (Emphasis

added.) In a special verdict, the jury awarded nothing

for the sale of the PPA compounds and $1 million for the

sublicense—just under 7.5% of the $15 million in cash

and equity Xenon received from Novartis.

Xenon moved posttrial for remittitur, which the

district court granted. The judge held that “the jury had

sufficient evidence to award plaintiff 7.5% of the full
18 Nos. 08-1351 & 06-3901

$4,000,000 that Novartis paid in cash for defendant’s

intellectual property.” But the judge concluded there

was insufficient evidence to support inclusion of a percentage of the $11 million in stock, which the evidence

suggested was part of a separately negotiated agreement.

The district court offered the Foundation a remittitur

of $300,000—7.5% of the $4 million cash fee—which the

Foundation accepted.

On appeal Xenon argues that the Foundation did not

provide sufficient evidence of damages to justify even a

$300,000 damages award. We review sufficiency-of-theevidence challenges de novo, viewing the evidence in

the light most favorable to the prevailing party and

drawing all inferences in its favor. Lopez v. City of Chicago,

464 F.3d 711, 718 (7th Cir. 2006). Under Wisconsin law a

plaintiff must present enough evidence to provide a

reasonable basis for calculating damages; the evidence

will be sufficient if it enables the jury to make a fair

and reasonable approximation of damages. See Olympia

Hotels Corp. v. Johnson Wax Dev. Corp., 908 F.2d 1363, 1372

(7th Cir. 1990); Brogan v. Indus. Cas. Ins. Co., 392 N.W.2d

439, 444 (Wis. Ct. App. 1986).

Under this lenient standard, the evidence is easily

sufficient to sustain the damages award. The Foundation

argued to the jury that the joint patent application was

the only item in the Xenon-Novartis package with any

real value, and thus the price Novartis paid reflected its

fair market value. The Foundation relied on a salespitch letter Xenon sent to Novartis offering to sell the

technology covered by the joint patent application; the
Nos. 08-1351 & 06-3901 19

letter made no mention of the PPA compounds or any

other patented technology. The Foundation also noted

that the joint patent application is listed first in the

Novartis agreement, arguably demonstrating priority

over the other listed patent applications. Moreover, the

Foundation noted that Xenon transferred only about

100 grams of the PPA compounds to Novartis—“left over”

material that was so insignificant that Xenon did not

price it or invoice it. Finally, the Foundation suggested

that Xenon’s “know-how” was valueless because the

phrase was defined in such a way as to include

nothing beyond what was already covered under “Xenon

Patent Rights.” Viewed in the light most favorable to the

Foundation, this evidence was sufficient to sustain the

damages award.

Xenon complains that the Foundation did not adequately establish the precise market value of the sublicense for the joint patent application as compared to the

other parts of the package. But Wisconsin law provides

that a contracting party that causes an uncertainty of proof

cannot demand a more precise measure of damages. See

Novo Indus. Corp. v. Nissen, 140 N.W.2d 280, 285 (Wis. 1966).

Xenon had a duty under the Exclusive Licensing Agreement to make an accounting to the Foundation on a

quarterly basis, to disclose any payments received, and

to explain how any amounts owed to the Foundation

had been calculated. It did not do so. Under these circumstances the Foundation was not required to establish a more specific measure of damages.

Xenon also argues that proving damages in this case

required the use of expert testimony, citing a number of
20 Nos. 08-1351 & 06-3901

Wisconsin cases holding that expert testimony is

required in complex or technical cases where the issue is

outside the common knowledge of a jury. See, e.g., Weiss

v. United Fire & Cas. Co., 541 N.W.2d 753, 757 (Wis. 1995)

(“The court has long recognized that certain kinds of

evidence are difficult for jurors to evaluate without the

benefit of expert testimony.”). Here, although the interlocking contracts were obviously technical and complex,

the issue of damages was not beyond a lay juror’s understanding. The Foundation was entitled to prove the

value of the sublicense essentially by a process of elimination—by showing that the other items in the XenonNovartis transaction had little or no value. This method

of proving damages dispensed with any need for expert

testimony regarding the market value of the joint

patent application.

4. The Foundation’s Right to Terminate the Exclusive

License Agreement

In addition to damages, the Foundation also asked for

a declaration that it had a right to terminate the

Exclusive License Agreement based on Xenon’s breach.

The district court granted summary judgment for the

Foundation on this claim, and on May 17, 2006, the

Foundation sent Xenon a letter terminating the Exclusive

License Agreement. Xenon responded with two

motions, one for reconsideration of the district court’s

decision and the other for a stay of execution of the judgment pending disposition of Xenon’s motion for reconsideration. The district court granted Xenon’s motion
Nos. 08-1351 & 06-3901 21

to stay enforcement of the judgment, holding that the

Foundation’s purported termination of the Exclusive

License Agreement was void because the Foundation had

not given Xenon notice and 90 days to cure its breach, as

the agreement required. The court further held that once

the Foundation filed this lawsuit, its right to terminate

the license agreement depended on a finding of breach

by the court. The judge concluded as follows: “[A]ny

attempted termination of the agreement that has already

occurred is suspended until the court has ruled on the

post-trial motions and plaintiff may not take renewed

action to terminate the agreement until that time.” A

month later, the district court granted Xenon’s motion

for reconsideration, agreeing that the Foundation had not

properly moved for summary judgment on this claim.

However, the judge also said that if the Foundation

wanted to terminate the Exclusive License Agreement, it

could now do so—because Xenon had been found in

breach—but that the Foundation was first required under

the terms of the agreement to give Xenon notice and

90 days to cure.

On appeal the Foundation challenges the district

court’s conclusion that its right to terminate the agreement did not arise until the court found Xenon in breach

of the agreement. The Foundation maintains that its

right to terminate was triggered by Xenon’s breach and

was not contingent upon the court’s finding of breach. The

Foundation also argues that it properly terminated the

agreement. We agree on both counts.

Section 7 of the Exclusive License Agreement governs

the Foundation’s right to terminate: 
22 Nos. 08-1351 & 06-3901

If Xenon at any time defaults in the timely payment of

any monies due . . . or commits any breach of any

other covenant herein contained, and Xenon fails to

remedy any such breach or default within ninety (90)

days after written notice thereof by [the Foundation,] . . . [the Foundation] may, at its option, terminate

this Agreement by giving notice of termination to

Xenon. 

In March 2005 the Foundation sent Xenon written notice

that it considered the Xenon-Novartis transaction to be a

sublicense of the joint patent application and that

Xenon owed the Foundation sublicense fees. The

relevant portion of the letter states:

Our analysis has led us to conclude that the Novartis

agreement is, in fact, a sub-license of rights granted

by [the Foundation] to Xenon and we also require

that Xenon remit . . . payment of any amounts owed to

[the Foundation] under the Agreement. In the event

that Xenon contends that no amounts are owed to [the

Foundation] or that the Novartis agreement is not a

sublicense as contemplated by the Agreement, Xenon

must immediately provide . . . a detailed written

explanation as to why such amounts are not owed or

why the Novartis agreement is not a sublicense . . . .

This letter plainly gave Xenon notice that the Foundation

considered it to be in breach of its payment obligations

under the Exclusive License Agreement. Notably, Xenon

does not disagree. Instead, Xenon argues that the Foundation did not provide 90 days to cure the breach because

the Foundation filed suit a month after sending Xenon
Nos. 08-1351 & 06-3901 23

this letter. The March 2005 notice, Xenon says, was therefore ineffective under the termination provision of the

Exclusive License Agreement.

We disagree. A contractual obligation to provide notice

and an opportunity to cure a default prior to terminating

a contract does not necessarily affect the aggrieved party’s

right to sue for breach. See Ameritech Info. Sys., Inc. v. Bar

Code Res., Inc., 331 F.3d 571, 573-74 (7th Cir. 2003). Here,

nothing in the Exclusive License Agreement prevented

the Foundation from suing for breach within the 90-day

cure period, id. at 574, nor was the Foundation’s right

to terminate somehow suspended by the filing of this

lawsuit. Having filed the suit, the Foundation’s right to

terminate did not become contingent upon the court

finding Xenon in breach. A contracting party’s right to

terminate arises under the terms of the contract and

need not await a formal declaration of the contracting

parties’ rights.

Here, the district court issued a stay of the execution of

its summary-judgment ruling pending disposition of

Xenon’s posttrial motions. A stay, unlike an injunction,

operates only on the judicial proceeding itself and does

not otherwise prohibit the parties from acting. See Nken

v. Holder, 129 S. Ct. 1749, 1757-58 (2009) (“An injunction

and a stay have typically been understood to serve different purposes. The former is a means by which a court

tells someone what to do or what not to do. . . . By contrast,

instead of directing the conduct of a particular actor, a

stay operates upon the judicial proceeding itself.”). Some

of the court’s language in the stay order is suggestive of
24 Nos. 08-1351 & 06-3901

an injunction: “[A]ny attempted termination of the agreement that has already occurred is suspended until the

court has ruled on the post-trial motions and plaintiff

may not take renewed action to terminate the agreement

until that time.” But if this was meant to be an injunction,

it was an improper one. As a procedural matter, injunctions must comply with the requirements of Rule 65(d) of

the Federal Rules of Civil Procedure; a court issuing

an injunction must, among other things, give advance

notice to the adverse party, hold a hearing on the matter,

explain why the injury that would occur without the

injunction is irreparable, and specify the scope of the

injunction in reasonable detail. The district court’s stay

order did not comply with these requirements.

Accordingly, the district court erroneously concluded

that the Foundation’s right to terminate the agreement

was contingent upon the court’s finding that Xenon had

breached the Exclusive License Agreement. The Foundation was entitled to terminate the agreement based on

Xenon’s breach, and it properly did so under the agreement’s termination provision. The Foundation’s

March 2005 letter was sufficient to give notice to Xenon

that the Foundation considered it in breach. More than

90 days elapsed between the time of this notice and the

Foundation’s letter—on May 17, 2006—terminating the

license agreement. Nothing more was required.

B. PPA Compounds

We move now to the second set of issues on appeal

concerning the ownership rights to the PPA compounds.
Nos. 08-1351 & 06-3901 25

Xenon argues that the Foundation is barred from bringing a 7

claim for ownership of the PPA compounds by the Settlement and Release Agreement signed by Xenon and the Univer-

(continued...)

The Foundation brought several claims pertaining to its

interests in the PPA compounds: It sued for a declaratory

judgment that Gray-Keller’s assignment to Xenon of his

interest in the compounds was void; it sought to quiet

title in the PPA compounds; and it sued for conversion

of its property rights. The parties filed cross-motions for

summary judgment on each of these claims, and the

district court entered judgment for Xenon on all three

claims. On appeal the Foundation reasserts its entitlement to an ownership interest in the PPA compounds.

A brief recap of the relevant facts is in order: Xenon, with

the help of Discovery Partners, used the jointly patented

assay to screen thousands of compounds for therapeutic

potential. Xenon and Discovery Partners identified a set

of 20 “PPA compounds” with the potential to lower SCD

levels in the human body, and Xenon sent these compounds to Gray-Keller for confirmatory screening. GrayKeller confirmed the cholesterol-inhibiting potential of

the PPA compounds and in July 2003 purported to

assign his rights to Xenon pursuant to the terms of his

consulting agreement.

The Foundation contends that the interlocking network

of contracts among the parties gives it ownership of GrayKeller’s interest in the PPA compounds, and therefore

Gray-Keller’s assignment is void. We agree. Under the 7
26 Nos. 08-1351 & 06-3901

(...continued) 7

sity in 2003. We need not spend much time on this argument.

As we have explained, supra n.1, the 2003 settlement pertained to a funding dispute between the University and Xenon;

it had nothing to do with who owns the intellectual-property

rights to the discoveries resulting from the jointly sponsored

research.

Sponsor Option Agreement, all University researchers

working on the Xenon-funded research program agreed

to assign to the Foundation their rights to any inventions

that they “conceived of or reduced to practice . . .

whether solely or jointly with others.” Each University

researcher, including Gray-Keller, signed an individual

Memorandum Agreement to that effect, and copies were

attached to and incorporated as part of the Sponsor

Option Agreement. The scope of the joint research

program was defined by three separate research agreements—Research Agreements 1, 2, and 3.

The Foundation maintains that Gray-Keller’s work on

the PPA compounds fell within the scope of Research

Agreement 2, and therefore Gray-Keller was required to

assign his interest in the compounds to the Foundation.

Research Agreement 2 generally covers research to

identify compounds that will influence SCD levels in the

human body for therapeutic effect on cholesterol levels.

While the scientific language and acronyms keep the

contract from being readily understandable to a

layperson, the scope of the research program is clear

enough. First, Exhibit A to Research Agreement 2 is titled

“Stearoyl CoA Desaturase (SCD) as a Target for
Nos. 08-1351 & 06-3901 27

Elevation of HDL.” It states that its overall goal is to

“evaluate SCD as a target for the development of drugs

that would increase the levels of HDL in plasma and

decrease triglycerides (which should have a therapeutic

impact on cardiovascular disease).” It then lists a handful

of more specific goals, such as to “[s]creen and rank order

substrates/inhibitors of SCD1 activity for impact on SCD1

transcription in vitro” and to “[e]valuate lead substrates/inhibitors from in vitro screen for their effect on

SCD1 transcription, SCD1 enzyme activity and HDL

metabolism in vivo.”

Gray-Keller’s work identifying and confirming the

therapeutic potential of the PPA compounds derived from

the SCD enzyme was expressly contemplated by

Research Agreement 2, which broadly covered research

“to validate SCD as a target for screening novel compounds that may elevate HDL levels in vivo.” Gray-Keller

performed his research on this project at the University

using University resources and was required under his

Memorandum Agreement to assign his interest in any

discoveries to the Foundation. The fact that his work was

conducted partly under Xenon’s sponsorship and at its

behest is not dispositive. Under the Sponsor Option

Agreement and each of the individual agreements

attached to it, the Foundation was entitled to ownership

of any discoveries “conceived of or reduced to practice”

by the researchers under the joint research program;

Xenon was entitled to an exclusive license to commercialize the discoveries. Accordingly, the district court

erred in granting summary judgment to Xenon on the

claims pertaining to the Foundation’s ownership interest
28 Nos. 08-1351 & 06-3901

Our holding in this regard makes it unnecessary to consider 8

the Foundation’s alternative argument that it had a right to

an ownership interest in the PPA compounds under the BayhDole Act.

1-5-10

in the PPA compounds. Under the Sponsor Option Agreement, the Memorandum Agreement, and Research Agreement 2, the Foundation was entitled to a declaration of

its ownership interest in the PPA compounds.8

III. Conclusion

For the foregoing reasons, we AFFIRM the judgment for

the Foundation on its claim that Xenon breached the

Exclusive License Agreement, as well as the district court’s

order entering judgment on the remittitur in the amount

of $300,000. We REVERSE the district court’s reconsideration order regarding the Foundation’s right to

terminate the Exclusive License Agreement; under the

terms of the agreement’s termination provision, the

Foundation was entitled to and properly terminated the

agreement. Finally, we REVERSE the judgment in favor

of Xenon on the Foundation’s claims to quiet title and

for declaratory judgment that Gray-Keller’s purported

assignment of his interest in the PPA compounds to

Xenon is void. On these claims, we REMAND with instructions to enter judgment in favor of the Foundation.