## Facts

- Drs. Barry A. Sacks and Hugh S. Vine developed an enteral feeding device used to feed patients directly through the stomach.
- Baladevon, Inc. held rights connected to the device, including rights tied to pending patent applications.
- In March 1986, Baladevon entered an agreement with Microvasive, Inc. (a Boston Scientific division) covering the device and related technology.
- The agreement transferred to Microvasive a broad package of rights, including rights in the device and method of use, improvements, and the right to use the “Sacks” and “Vine” names in connection with the product, along with other rights related to manufacturing, use, or sale of products incorporating the covered developments.
- The royalty provisions were not limited to patented subject matter; royalties were owed on inventions and improvements related to the device whether or not they were patentable.
- After the agreement was signed, it was discovered that Dr. Sacks had publicly disclosed the invention in a published article, which invalidated (or made invalid) the patent rights tied to the device.
- Microvasive/Boston Scientific later assigned its interests in the device and agreement to Abbott Laboratories, Inc.
- Abbott continued making and selling the feeding device and continued using non-patent benefits under the agreement (including name/trademark-related rights), but it stopped paying royalties once the patents were recognized as invalid.
- Baladevon sued Abbott seeking royalties owed under the agreement. Abbott argued that enforcing royalty obligations after patent invalidity would conflict with federal patent-law policy.
- Both parties moved for summary judgment.

## Issues

1. Whether a royalty obligation in an agreement that covers both patent and non-patent rights can be enforced after the associated patents are invalid, or whether federal patent policy bars enforcement.
2. Whether the agreement should be treated as a purely patent-based royalty arrangement (more vulnerable to patent-policy limits) or as a broader transfer of mixed rights supporting continued royalties.
3. Whether Abbott, as assignee, could stop paying royalties while continuing to manufacture and sell the device and use the non-patent rights conveyed by the agreement.

## Decision

- The court denied Abbott’s motion for summary judgment.
- The court allowed Baladevon’s motion for summary judgment in part, holding that the agreement was not merely a patent license but a bargain covering a package of patent and non-patent rights.
- The court rejected Abbott’s argument that patent-law policy categorically prevented enforcement of the royalty terms once the patents proved invalid, because the royalties were consideration for more than patent exclusivity and Abbott continued to benefit from non-patent rights under the deal.
- The court ruled that Abbott could not keep the benefits of the agreement (including continued production and associated non-patent rights) while refusing to pay the contractual royalties on the ground that the patents were invalid.
- Remaining remedial details were to be addressed consistent with the court’s construction of the agreement and its ruling on liability.

## Legal Principles

- A royalty agreement tied to a transaction conveying both patent and non-patent rights may remain enforceable even if the patent rights later fail, where the royalty is consideration for the overall package transferred.
- Federal patent-law policy limiting enforcement of patent-based royalty arrangements does not automatically void obligations in an agreement that also transfers non-patent rights (such as name/trademark rights, know-how, and other rights connected to making and selling the product), particularly when the payor continues using those benefits.
- An assignee who takes rights under a technology agreement and continues exploiting the transferred non-patent rights may be held to the agreement’s payment terms despite later patent invalidity.

## Conclusion

The District of Massachusetts held that Baladevon could pursue royalties under an agreement transferring a bundle of patent and non-patent rights in an enteral feeding device even after the patents were invalidated by prior public disclosure, and it denied Abbott’s attempt to avoid payment while continuing to manufacture and sell the device and use the agreement’s non-patent benefits.


Baladevon, Inc. v. Abbott Laboratories, Inc., 871 F. Supp. 89 (1994)