Opinion ID: 1463107
Heading Depth: 2
Heading Rank: 2

Heading: PPA Compounds

Text: We move now to the second set of issues on appeal concerning the ownership rights to the PPA compounds. 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. Gray-Keller 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 Gray-Keller's interest in the PPA compounds, and therefore Gray-Keller's assignment is void. [7] We agree. Under the 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 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 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]