United States District Court, D. Massachusetts
MARK G. CHAREST, Plaintiff,
PRESIDENT AND FELLOWS OF HARVARD COLLEGE and ANDREW G. MYERS, Defendants. v.
MEMORANDUM & ORDER
DOUGLAS P. WOODLOCK, UNITED STATES DISTRICT JUDGE.
While a chemistry graduate student at Harvard University, Dr. Mark Charest worked in a laboratory supervised by Dr. Andrew Myers. There, he, along with Dr. Myers and other scientists, discovered a novel and valuable method for creating synthetic tetracyclines, which have applications in the development of commercial antibiotics. Dr. Charest assigned his rights in the patents for this invention to Harvard, as he was required to do pursuant to the participation agreement that he signed with the University. Harvard, in turn, licensed these patents to Tetraphase, a company founded for the purpose of commercializing the patented invention. Dr. Charest claims that Harvard has now deprived him of the share of the royalty stream to which he is entitled from this license.
He alleges, first, that Harvard and Dr. Myers coerced him under threats and duress to enter an agreement which reduced his share of the royalties from the patents and increased Dr. Myers’ share. Second, he contends that Harvard amended the Tetraphase License to include additional patented technology, and then improperly allocated an outsize share of the Tetraphase License royalties to this new patent on which Dr. Myers was, but Dr. Charest was not, a listed inventor.
Dr. Charest contends that this conduct breached contractual obligations to him assumed by Harvard and embodied in Harvard’s intellectual property policy, and also constitutes a violation of various common law and statutory prohibitions. The Defendants move to dismiss.
A. Factual Background
The facts drawn from the Amended Complaint are as follows:
1. Dr. Charest’s Enrollment at Harvard
Dr. Charest enrolled at Harvard University as a doctoral student in the organic chemistry department in 1999. Am. Compl. ¶ 10. While a student, Dr. Charest was advised and mentored by Dr. Myers, and focused his research on investigating the synthetic creation of tetracycline antibiotics, a project suggested by Dr. Myers. Am. Compl. ¶¶ 15-16. Prior to Dr. Charest’s enrollment, Dr. Myers had been unable to create a route for creating new synthetic tetracyclines and told Dr. Charest that if he successfully worked out the problem “they could make a  billion dollars.” Am. Compl. ¶¶ 8-9.
2. The Discovery of a Synthetic Route for the Production of Tetracycline Antibiotics
In 2004, in collaboration with others, Dr. Charest discovered a method to synthetically create a new class of tetracycline antibiotics. Am. Compl. ¶ 11. More specifically, Dr. Charest discovered a method for taking an intermediary and using that intermediary to make a new class of tetracycline antibiotics in as little as three steps. Id. This invention was particularly valuable because of its potential to treat otherwise antibiotic-resistant bacteria. Am. Compl. ¶ 12. Prior to the publication of Dr. Charest’s doctoral thesis, Harvard began work on patenting the discovery and Dr. Charest worked with Harvard’s patent counsel, Dr. C. Hunter Baker, on patent applications covering his research (the “Pioneering Patents”). Am. Compl. ¶¶ 13, 28.
After the patent applications were filed, Dr. Charest and his collaborators published the results of their research in the April 2005 issue of Science under the title “A Convergent Enantioselective Route to Structurally Diverse 6-Deoxytetracyline Antibiotics.” Am. Compl. ¶ 14. Because his contributions to the research were greatest, Dr. Charest was the first-listed author of the article. Am. Compl. ¶ 15. Based upon the results of his research on routes for the creation of synthetic tetracycline, Dr. Charest received his Ph.D. in organic chemistry in 2004. Am. Compl. ¶ 10.
3. The Harvard Participation Agreement and the Harvard Intellectual Property Policy
In 2003, while a student at Harvard, Dr. Charest signed the Harvard University Participation Agreement. Am. Compl. ¶ 19, Ex. A. That agreement confirms that Dr. Charest “ha[s] read and  understand[s] and agree[s] to be bound by the terms of the ‘Statement of Policy in Regard to Inventions, Patents and Copyrights’” and “understand[s] and accept[s] the provision of the University’s royalty income sharing policy . . . as amended from time to time.” Am. Compl. Ex. A.
The Harvard University Royalty Sharing Policy for Intellectual Property (the “IP Policy”) in effect from 2001 until 2008 provided that patent inventors share 35% of the first $50, 000 of royalties and 25% of any amounts above $50, 000. MD Ex. D at 1. The policy provided that, in the case of a single invention, “[e]ach inventor receives equal shares of the inventor(s)’ portion, unless all inventors agree otherwise. A deviation from the policy of equal sharing requires a written agreement of all inventors.” Id. at 3; Am. Compl. ¶¶ 23-24.
The IP Policy in effect from 2001 until February 2008 provided that, when more than one invention is included in a license agreement:
1. Ordinarily each invention/case included in a license shall be considered of equal value. Absent any objection from the inventors prior to distribution of income, license income not specifically linked to an invention/case will be equally divided among all inventions/cases included in the license.
2. If [Harvard’s Office of Technology Transfer and Licensing] determines . . . that the inventions/cases should have unequal value, they will notify those individuals identified as inventors at that point in time. Absent any objection from the inventors prior to the distribution of income, license income not specifically linked to an invention case will be divided among the inventions/cases according to that determination.
3. If all the inventors of all the inventions/cases included in the license agree upon the relative value of those inventions/cases, income from that license will be allocated according to that valuation.
4. At such time as income is clearly attributable to individual inventions/cases (e.g., when the product actually being sold only uses one invention), income shall be allocated to the inventions/cases actually generating the income.
5. If any of the inventors disagrees with the above, he/she may appeal to the Committee on Patents and Copyrights. Any such appeal shall only apply to allocation of income received after the appeal unless the appeal is made within thirty days of the inventors being notified of the license agreement and the planned valuation of the inventions/cases.
MD Ex. D at 4.
This policy was amended in February of 2008. The post-2008 version provides that for a single invention, “Personal . . . shares . . . will be allocated among Inventors . . . according to a written agreement among them or, if there is no agreement, in equal shares.” MD Ex. E, § 5(E)(1). For multiple patents licensed as a package, the post-2008 policy provides that royalties will be shared:
[a]s agreed in writing among all Inventors or, if no agreement, in equal shares among Inventors. In the alternative, upon request of any of the Inventors, OTD will determine the relative value of each patent to the package with the Inventor(s) of each patent sharing equally in the value assigned by OTD. The foregoing notwithstanding, where an executed license agreement assigns different values to different patents licensed as a package, that value shall be the value assigned for purposes of royalty sharing among Inventors.
MD Ex. E, § 5(E)(3). The post-2008 agreement provides that OTD’s determination of the relative value of the patents licensed as a package “may be appealed by the persons affected to the Committee on Intellectual Property for final determination.” MD Ex. E, § 5(F). Section 6 of the post-2008 agreement provides that:
The University Committee on Intellectual Property, appointed by the President, shall be responsible for interpreting this policy and resolving questions and disputes concerning it. From time to time the Committee may suggest changes to this policy on its own initiative or at the request of the President and Fellows of Harvard College or its designee.
Other responsibilities of the Committee include the hearing of appeals as provided under this policy and other such duties as may be assigned from time to time by the President and Fellows of Harvard College or its designee.
In addition to the right to make changes specifically provided elsewhere in this policy, the University reserves the right to amend or modify any of the terms of this policy as it may determine from time to time. Any such modification or amendment shall become effective upon adoption by the President and Fellows of Harvard College or as of such other time as the President and Fellows of Harvard College shall specify.
MD Ex. E, § 6.
The policy was modified again effective October 4, 2010. The post-2010 policy, like the 2008 version, provides that, for a single patented invention, “Personal . . . shares . . . will be allocated among Inventors . . . according to a written agreement among them or, if there is no agreement, in equal shares.” MD Ex. F, § 5(E)(1). The 2010 amendments altered the language governing distribution of royalties from multiple inventions licensed as a package, providing that:
First, Net Royalties will be allocated among the licensed Creations as agreed in writing among all Creators or, if no agreement, in equal shares among such Creations. In the alternative, upon request of any of the Creators, OTD will determine the relative value to the package of each of the Creations. The foregoing notwithstanding, where an executed license agreement assigns different values to different Creations licensed as a package, that value shall be the value assigned for purposes of allocating Net Royalties among such Creations. Second, the Creator personal share . . . of Net Royalties so allocated to each of the Creations in the package will be allocated in accordance with Paragraph E.1.
MD Ex. F, § E(3). As with the 2008 policy, the 2010 amendment provides that determinations of relative value “may be appealed by the persons affected to the Committee on Intellectual Property for final determination.” MD Ex. F, § V(F).
The 2010 Amendments alter the third paragraph of Section 6, so that that paragraph reads:
In addition to the right to make changes specifically provided elsewhere in this policy, the University reserves the right to amend or modify any of the terms of this policy as it may determine from time to time. The President and the Fellows of Harvard College (the “Corporation”), the President of the University, and the Provost of the University each severally shall have the power to make such amendments and modifications. Any such modification or amendment shall become effective upon adoption by the Corporation, President or Provost, as the case may be, or as of such other time as the Corporation, President or Provost, as the case may be, shall specify.
MD Ex. F, § 6(C).
The Statement of Policy in Regard to Inventions, Patents and Copyrights in effect prior to 2001 states that “a standing University Committee on Patents and Copyrights was created in 1975. This committee has representation from the principal faculties potentially affected by policies in this area and from the administration, and its chairman is a senior administrative officer of the University reporting directly to the President. It is charged with responsibility for interpreting and applying University policy in individual cases, and for recommending such changes in University policy as from time to time may be required.” MD Ex. C at 1. No subsequent versions of the IP Policy refer to the Committee on Intellectual Property and/or Patents and Copyrights as a “standing” committee.
Harvard’s “Concise Guide” to its IP Policy, which makes reference to the 2008 amendments to that policy, describes the “University Committee on Intellectual Property” as a “standing committee appointed by the President.” Am. Compl. Ex. C, § VI.
5. Dr. Charest Assigns the Patents to Harvard and Harvard Licenses the Patents to Tetraphase
In a document, Dr. Charest assigned his rights in the Pioneering Patents covering his work on the synthetic creation of tetracycline antibiotics to the President and Fellows of Harvard College. Am. Compl. ¶ 29; MD Ex. B. That document recites that the assignment was given “[i]n consideration of One Dollar ($1.00) and other good and valuable consideration.” MD Ex. B at 1.
At the time that he made the assignment, Dr. Charest expected that Harvard would abide by the IP Policy. Am. Compl. ¶ 30.
Harvard, through OTD, licensed the Pioneering Patents to Tetraphase, a company created by OTD and Dr. Myers for the purpose of commercializing the Pioneering Patents. Original Compl. ¶ 41. Dr. Myers served and serves as a founder and consultant for Tetraphase. Original Compl. ¶ 42. On the basis of the value provided by the Pioneering Patents, Tetraphase raised more than $25 million in funding from investors. Original Compl. ¶ 44. In the license agreement, Tetraphase agreed to pay Harvard milestone payments and royalties on future sales of tetracycline drugs, as well as an upfront payment of $250, 000. Original Compl. ¶¶ 44, 130.
The Tetraphase license is OTD’s most successful license to date. Over the life of the license, OTD could claim credit for bringing in over $1 billion in revenue. Am. Compl. ¶ 34. As a result of the success of this license, Dr. Myers is held in high regard and given significant latitude by the OTD. Id.
6. The Allocation of Royalty Shares from the Licensing of the Pioneering Patents
On August 8, 2006, Dr. Erik Halvorsen, then director of business development for OTD, emailed Dr. Charest and the other non-faculty inventors on the Pioneering Patents. Am. Compl. ¶ 35. Dr. Halvorsen’s email informed the non-faculty inventors of the creation of Tetraphase and explained that, instead of an equal distribution of royalties, Dr. Myers would receive 50%, Dr. Charest, Dr. Seigel and Dr. Lerner would each receive 15%, and Dr. Brubaker would receive 5%. Am. Compl. ¶¶ 35-36. This allocation was made without consultation with the non-faculty inventors. Am. Compl. ¶ 40. Dr. Halvorsen’s email included an agreement for them to sign. That agreement stated that “[w]e acknowledge that the Harvard University Royalty Sharing Policy for Intellectual Property specifies that, for inventions, the creators’ share normally will be divided equally among all creators unless they agree otherwise.” Am. Compl. ¶ 37.
After receiving the email from Dr. Halvorsen, Dr. Charest discussed the allocation with the other inventors. The other inventors agreed to adjust the shares so that Dr. Charest received 18.75%, Dr. Siegel received 11.25%, and Dr. Lerner and Dr. Brubaker received 10% each. Am. Compl. ¶ 38. When approached by Dr. Charest, Dr. Halvorsen stated that Dr. Myers’ share was not open to discussion. Am. Compl. ¶ 39.
7. Dr. Myers and Dr. Halvorsen Threaten Dr. Charest in Order to Induce him to Accept the Proposed Allocation
When Dr. Charest spoke with Dr. Myers expressing his opposition to the allocation, Dr. Myers told Dr. Charest to “tread lightly” and “be careful, ” which Dr. Charest understood to be threats. Am. Compl. ¶ 39. Dr. Myers followed through on these threats by refusing to act as a reference, a rarity in the field of academic chemistry, when Dr. Charest was applying for a venture capital job. Am. Compl. ¶ 42. This refusal was a contrast to the strong recommendations given by Dr. Myers to Dr. Charest prior to the royalty dispute arising. Am. Compl. ¶ 43.
During discussions about the royalty allocation, Dr. Halvorsen told Dr. Charest that, if he did not accept the proposed allocation, he would reduce Dr. Charest’s royalty share by allocating 50% of the license royalties to another, undisclosed patent on which Dr. Charest was not an inventor. Am. Compl. ¶ 46. Dr. Halvorsen refused to show Dr. Charest the patent application even when Dr. Charest offered to sign a ...