## Facts

- American Cyanamid Co. marketed Materna, a prescription prenatal vitamin with iron, and asked University of Colorado researchers Dr. Robert H. Allen and Dr. Paul A. Seligman to conduct an iron-absorption comparison study.
- The researchers went beyond the requested study, developing improved Materna-type formulations by experimenting with different iron salts and excipients and testing absorption.
- The researchers compiled their results and the improved formulations in a confidential manuscript and provided it to Cyanamid’s scientific director, Dr. Leon Ellenbogen, with an expectation of confidentiality and without transferring invention rights.
- Ellenbogen, without naming the researchers as inventors or obtaining consent, filed a patent application that copied substantial portions of the manuscript and issued as U.S. Patent No. 4,997,634, listing Ellenbogen as sole inventor.
- Cyanamid launched reformulated Materna corresponding to the patented compositions and used the patent to deter or block generic competition.
- The researchers received no attribution or compensation for the patented formulations.
- The University plaintiffs sued in federal district court in Colorado; after remand from an earlier appeal and further proceedings, the district court found Cyanamid committed fraud and was unjustly enriched, awarding disgorgement of incremental profits (over $23 million) and exemplary damages of $500,000 to each doctor.

## Issues

1. Whether Colorado unjust-enrichment law permits restitution requiring disgorgement of incremental profits gained through fraudulent appropriation and patenting of another’s confidential research.
2. Whether the evidence supported the district court’s finding that Cyanamid’s incremental Materna profits were caused by the exclusionary effect of the wrongfully obtained patent and whether the “but-for” profit model was permissible.
3. Whether Colorado law allowed exemplary damages to the individual researchers based on the fraud findings, and whether the amounts awarded were proper.

## Decision

- The Federal Circuit affirmed the district court’s judgment.
- The court upheld unjust-enrichment liability and the restitutionary remedy requiring Cyanamid to disgorge incremental profits attributable to the patent-based exclusion of generics.
- The court held the district court’s causation findings and market reconstruction for incremental profits were not clearly erroneous.
- The court affirmed exemplary damages of $500,000 to each doctor based on intentional fraud.

## Legal Principles

- Under Colorado law, unjust enrichment requires (1) a benefit conferred, (2) the defendant’s appreciation of the benefit, and (3) acceptance and retention of the benefit under circumstances making it inequitable to retain without payment.
- Colorado restitution may be measured by disgorgement of profits (not limited to the value of services) when profits are tied to wrongful conduct involving another’s confidential work or efforts.
- A restitution award may be limited to incremental profits attributable to the wrongful conduct using a reasonable “but-for” reconstruction; appellate review of such factual findings is for clear error.
- Under Colorado law, exemplary damages may be awarded where conduct involves fraud or willful and wanton disregard of others’ rights; intentional misrepresentation of inventorship and copying from a confidential manuscript can satisfy that standard.

## Conclusion

The Federal Circuit held that Colorado unjust-enrichment law supported disgorgement of Cyanamid’s incremental profits obtained through fraudulent patenting and exploitation of university researchers’ confidential discoveries, and it affirmed both the profit-based restitution award and exemplary damages grounded in intentional fraud.


Univ. of Colo. Found., Inc. v. Am. Cyanamid Co., 342 F.3d 1298 (Fed. Cir. 2003)