Source: https://law.justia.com/cases/california/court-of-appeal/4th/58/44.html
Timestamp: 2019-04-20 07:12:40+00:00

Document:
DOUGLAS V. SHAW, Plaintiff and Respondent, v. THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, Defendant and Appellant.
P. Martin Simpson, Jr., James E. Holst, John F. Lundberg, Robert Barnes, Arnold, White & Durkee, Gerald P. Dodson and James F. Valentine for Defendant and Appellant.
This case involves a dispute over a policy of the Regents of the University of California (the University) which provides that, as a condition of employment by the University, an employee must assign to the University any of the employee's inventions and patents conceived in the course of employment; as consideration for the assignment, the employee will get a percentage of those net royalties and fees received by the University for a patented invention.
When Associate Professor Douglas V. Shaw was hired by the University to teach and do research, the patent policy specified that employees would get 50 percent of the net royalties and fees received from their inventions. The University later revised the policy to reduce this percentage. When the University announced it would pay Shaw the reduced percentage for his patented inventions conceived after the policy change, Shaw brought this action, seeking a declaration that he is entitled to 50 percent of the net royalties and fees.
The University appeals from the judgment entered in Shaw's favor following an order granting summary judgment on his complaint for declaratory relief. According to the University, the patent policy in effect at the time Shaw was hired was not part of the patent agreement signed by Shaw as a condition of his employment; rather, it is a personnel policy that the University may modify unilaterally at any time.
We shall affirm the judgment. As we shall explain, the patent agreement between Shaw and the University is a contract which incorporates the terms of the patent policy in effect at the time Shaw was hired. Although the University is entitled to revise its patent policy, it cannot do so with respect to Shaw because of its written agreement with him, specifying that he would receive 50 percent of the net royalties and fees from his inventions patented by the University.
Shaw was hired in 1986 to teach and do research in the department of pomology at the University of California, Davis. Pomology is the science of the cultivation of fruits. In recent years, Shaw has concentrated his research on the genetics of strawberries.
At the time he became a member of the University faculty, Shaw was asked to sign a single-page, two-sided University form document entitled [58 Cal. App. 4th 48] "State Oath of Allegiance and Patent Agreement." The document contains (1) a half-page "State Oath of Allegiance," (2) a half-page "Patent Agreement," and (3) the "University Policy Regarding Patents" (the Patent Policy).
The Patent Policy begins on one side of the document and continues onto the next side. It states that the University, "in administering intellectual property rights for public benefit, desire[s] to encourage and assist members of the faculties, employees, and others associated with the University in the use of the patent system with respect to their discoveries and inventions in a manner that is equitable to all parties involved."
The Patent Policy provides that "[a]n agreement to assign inventions and patents to the [University] ... shall be mandatory for all employees, for persons not employed by the University but who use University research facilities and for those who receive grant or contract funds through the University." It also provides that exceptions to this assignment requirement may be authorized when "the mission of the University is better served" thereby.
As to those who have agreed to assign their inventions to the University, the Patent Policy states that "[t]he [University] agree[s], for and in consideration of said assignment of patent rights, to pay annually to the named inventor(s), the inventor(s)' heirs, successors, or assigns 50 percent of the net royalties and fees received by [the University]."
The patent agreement obligates the signatory to inform the University promptly of "every possibly patentable device, process, plant or product, hereinafter referred to as 'invention,' " which the signatory may conceive in the course of University employment. Should the University deem the invention patentable, the signatory promises thereafter "to assign to University all rights, title and interest" in the invention.
Shaw signed the patent agreement on February 25, 1986.
At or near the time he assumed his position at the University, Shaw also received a pamphlet from the University entitled "Patent Practices at the University of California." It summarizes the Patent Policy and states that, in exchange for their agreement to assign patents to the University, employees shall receive 50 percent of net royalties and fees received by the University for their inventions.
In 1989, the University announced its intention to revise the Patent Policy to reduce the percentage of royalties it would pay to inventors.
In written memoranda to the University, Shaw objected to the application of a revised Patent Policy to individuals who, like him, had signed the patent agreement under the then existing Patent Policy.
In April 1990, the University officially revised its Patent Policy to reduce an inventor's share of net royalties and fees from a flat rate of 50 percent to a sliding scale in which the inventor would receive 50 percent of the first $100,000, 35 percent of the next $400,000, and 20 percent of any additional net royalties and fees. The University's president announced that the creation of this sliding scale "responds to internal criticisms of the present system and to concerns that-particularly in a public institution-the goal of such a policy should be to provide support and incentives for further productive research rather than the highest earnings for individual inventors." In the University's view, its 1990 Patent Policy increases the percentage of royalties that can be used to fund additional research and "is much more in line with what most of the other universities in the states do."
In December 1992, Shaw (as coinventor with two other University professors) disclosed to the University his invention of six new strawberry cultivars. The University informed Shaw that these inventions "will be governed by the UC Patent Policy at the time of the disclosure," i.e., by the 1990 Patent Policy which calculates an inventor's share of net royalties on declining sliding scale.
Shaw objected and argued the University should instead "meet its obligation under the Patent Agreement that [Shaw] signed" to pay inventors 50 percent of the net royalties. The University declined, asserting that the Patent Policy is not a contract but merely a "personnel policy grounded in the employment relationship" and the University "may prospectively change its [58 Cal. App. 4th 50] personnel policies unilaterally," provided it gives advance notice to employees of its intent to do so.
The University directed Shaw to execute an assignment of his interest in the patents of the six strawberry cultivars. The assignment provided that net royalties for the new plants would be divided in accordance with the "benefits stipulated for the inventor in the 'University of California Patent Policy' revised effective April 16, 1990, which document is made by reference a part hereof and in fulfillment of the Assignor's Patent Agreement with the University of California ...." When Shaw refused to sign the assignment, the University agreed to modify its terms to provide that consideration for the assignment includes a share of net royalties in accordance with "the applicable University of California Patent Policy," so as to preserve the parties' respective positions on what policy should apply.
Shaw then brought this action, seeking a declaration that, (1) in consideration for his execution of the patent agreement, the University agreed to distribute to him 50 percent of the net royalties and fees accruing from any invention he might conceive, and (2) the University may not unilaterally modify the terms of the patent agreement without Shaw's written consent.
Shaw moved for summary judgment on the grounds that (1) absent the patent agreement, the University has no right or interest in any of Shaw's inventions; (2) in the text of the patent agreement, Shaw expressly reserves his rights to "a percentage of royalty payments received by University, as set forth in the University Policy Regarding Patents"; (3) the University may not unilaterally modify the patent agreement's terms without his consent; and (4) Shaw continues to own those patent rights which he did not waive, i.e., 50 percent of the net royalties and fees with respect to any invention.
The trial court granted Shaw's motion for summary judgment and issued a statement of decision. The court found that Shaw had presented a prima facie case establishing that the patent agreement constitutes an enforceable contract with the University; that the patent agreement must be interpreted in accordance with the Patent Policy set forth on the same document; and that the University's 1990 modification of the Patent Policy cannot effectively modify the parties' patent agreement, in light of Shaw's objection. Accordingly, the court held, the patent agreement must be construed to require the University to pay Shaw 50 percent of the net royalties and fees received by the University for all inventions disclosed by Shaw.
The trial court entered judgment in favor of Shaw, and this appeal ensued.
[1a] The University begins its argument on appeal by advancing a theory that it admits was not raised before the trial court. Characterizing Shaw's complaint as "a challenge to the administrative decisions of a state agency in establishing its policies," the University claims the trial court erred in applying "a straightforward contract analysis" rather than the standard of review for a mandamus action, i.e., that the University's decision to revise its Patent Policy must be upheld so long as it is not arbitrary, capricious, or entirely lacking in evidentiary support.
To support this argument, the University relies principally on the decision in Bunnett v. Regents of University of California (1995) 35 Cal. App. 4th 843 [41 Cal. Rptr. 2d 567], which was issued after the entry of judgment in this case.
[1b] We shall consider, but reject, the University's claim of error. While it is true the University's administrative decisions regarding its faculty are [58 Cal. App. 4th 52] properly reviewed by writ of mandate (e.g., McGill v. Regents of University of California (1996) 44 Cal. App. 4th 1776, 1785 [52 Cal. Rptr. 2d 466] [denial of tenure]; Bunnett v. Regents of University of California, supra, 35 Cal.App.4th at pp. 847-848 [denial of professor's application to enroll in early retirement incentive program]), Shaw does not challenge an administrative decision of the University. He seeks an interpretation of his existing written contract with the University.
As a general proposition, mandamus is not an appropriate remedy for enforcing a contractual obligation against a public entity. (California Teachers Assn. v. Governing Board (1984) 161 Cal. App. 3d 393, 399 [207 Cal. Rptr. 659]; Wenzler v. Municipal Court (1965) 235 Cal. App. 2d 128, 132 [45 Cal. Rptr. 54].) Thus, the trial court correctly applied contract principles in resolving the parties' dispute over the patent agreement.
[3a] We first consider whether Shaw has demonstrated that he is entitled to a declaration on summary judgment that the patent agreement is an enforceable agreement which entitles him to 50 percent of the net royalties and fees from his strawberry cultivars.
[3b] The written patent agreement, signed by Shaw, contains all the essential elements of a contract: "(1) parties capable of contracting; (2) their [58 Cal. App. 4th 53] consent; (3) a lawful object; and (4) a sufficient cause or consideration. (Civ. Code, § 1550.)" (Marshall & Co. v. Weisel (1966) 242 Cal. App. 2d 191, 196 [51 Cal. Rptr. 183].) The University's statement of undisputed facts raises no issue of material fact as to whether the patent agreement is a valid agreement.
[3c] By its terms, the patent agreement embodies Shaw's promises to disclose any inventions he may create in the future so that the University may "examine ... and determine rights and equities therein in accordance with the Policy" and, if the University "desires ... to seek patent protection thereon," to assign his interest in the invention to the University.
We turn now to the critical issue: Does the patent agreement entitle Shaw to 50 percent of the net royalties of any invention that he may create and thereafter assign to the University?
It is undisputed that the text of the patent agreement itself contains no provision identifying what percentage, if any, of net royalties shall be paid to an employee who creates a patentable invention in the course of University employment. It also is undisputed that the Patent Policy, which is printed on the same document as the patent agreement signed by Shaw, contains an agreement by the University to pay 50 percent of the net royalties to an inventor who has assigned an invention to the University.
 We find no merit in the University's suggestion that, as a public employee who is employed pursuant to statute, not contract, Shaw has no vested contractual right in his terms of employment, such terms being subject to change by the University.
[3d] We also reject the University's argument that the Patent Policy is a mere personnel policy which it may modify unilaterally. Although the University is entitled to revise its Patent Policy, it cannot do so with respect [58 Cal. App. 4th 56] to Shaw because of its written agreement with him. The University prepared, and Shaw signed, a patent agreement whose references to the Patent Policy are so direct as to indicate the parties' intent to incorporate the policy's thenexisting terms into the patent agreement, including the University's promise to pay Shaw 50 percent of the net royalties of any patentable invention. Whether, absent the incorporation, the Patent Policy would constitute a mere statement of personnel policy is immaterial. Having made the Patent Policy a part of its written agreement with Shaw, the University may not unilaterally revise it as to him.
In sum, we conclude that the patent agreement signed by Shaw incorporates the Patent Policy, and the University may not refuse to allocate the 50 percent net royalty payments attributable to Shaw's inventions in accordance with the terms of the document.
The judgment is affirmed. The University shall pay Shaw's costs on appeal.
Sims, Acting P. J., and Sparks, J., fn. * concurred.
Appellant's petition for review by the Supreme Court was denied December 23, 1997.
FN . Judge of the Yolo Municipal Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
FN . Retired Associate Justice of the Court of Appeal, Third District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
FN 1. In 1990, the University revised the patent agreement to include the following: "I also understand and agree that the University has the right to change the Policy at any time, including the percentage of net royalty payments paid to me."
FN *. Retired Associate Justice of the Court of Appeal, Third District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

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