## Facts

- The University of California employed Dr. John Kucharczyk and Dr. Michael Moseley as research scientists at UCSF; each signed a Patent Agreement assigning employment-related inventions to the University in exchange for 50% of royalties collected under the University’s patent policy.
- In 1989, the plaintiffs invented an MRI perfusion-imaging method using DyDTPA-BMA; they disclosed it and assigned rights to the University.
- The invention was patented as U.S. Patent No. 5,190,744, which the University owned and licensed.
- The University granted Nycomed Salutar an exclusive license, receiving a $25,000 lump-sum royalty; the University paid the plaintiffs half of that amount under its royalty-sharing practice.
- Relatedly, Salutar agreed to contribute $150,000 toward research connected to a state grant application; the state would match that amount.
- The plaintiffs claimed the invention was worth far more, that the University’s licensing approach improperly limited royalties, and that they were owed additional compensation.
- A central dispute was whether additional materials (the last six pages of “Exhibit 21” to a Sponsored Programs Office handbook, including a “summary of sponsor patent rights”) were part of the University’s patent policy and required licensing terms that “normally included annual royalties.”
- Plaintiffs sued the University and private entities, asserting multiple state-law theories and a federal civil-rights claim under 42 U.S.C. § 1983 based on alleged deprivation of property rights in royalties and licensing outcomes.
- The case came before the district court on cross-motions for summary judgment focused on the scope of the patent policy, royalty obligations, and the § 1983 claim.

## Issues

1. Whether the University’s patent policy, as incorporated into the plaintiffs’ Patent Agreements, required the University to negotiate or obtain running royalties rather than accept a lump-sum payment.
2. Whether the “Exhibit 21” sponsor-rights summary was part of the University’s patent policy governing the University–inventor relationship and therefore contractually binding.
3. Whether the plaintiffs had a constitutionally protected property interest, actionable under 42 U.S.C. § 1983, in additional royalties or a particular licensing structure.

## Decision

- The court granted summary judgment for the University on the contract-based claims tied to the asserted obligation to obtain running royalties.
- The court held that the sponsor-rights summary in Exhibit 21 was not part of the University’s patent policy applicable to faculty inventors.
- The court held the patent policy required only that the University share 50% of net royalties actually received, not that it pursue any specific royalty structure or amount.
- The court granted summary judgment for the University on the § 1983 claim, finding no cognizable property right to licensing terms or royalties beyond those created by the Patent Agreement and properly construed policy.

## Legal Principles

- A patent assignment agreement that incorporates an institutional patent policy incorporates only those policy materials that are properly part of the policy governing the inventor–institution relationship; informational sponsor-rights summaries aimed at funding agreements are not automatically contractual terms with inventors.
- Policy language requiring distribution of a percentage of “net royalties, if any,” creates a right to share in royalties actually received, not a right to compel the institution to negotiate running royalties or any particular licensing arrangement.
- For § 1983 due-process purposes, a property interest must be grounded in a recognized source such as contract or established policy; absent a contractual entitlement to additional royalties or a specified licensing approach, there is no protected property interest in preferred licensing outcomes.

## Conclusion

The court concluded that the University satisfied its royalty-sharing obligations by paying the plaintiffs half of the lump-sum royalty it received, that the patent policy did not require running royalties, and that the plaintiffs lacked a federally protected property interest supporting a § 1983 claim for additional royalties or different licensing terms.


Kucharczyk v. Regents of the Univ. of Cal., 946 F. Supp. 1419 (N.D. Cal. 1996)