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Affymax, Inc v. Johnson & Johnson

March 21, 2011


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:


Affymax, Inc. sued various defendants, including Ortho-McNeil Pharmaceutical, Inc. and Johnson & Johnson Pharmaceutical Research & Development, L.L.C. ("OMN" and "PRD," but collectively "Ortho"), seeking correction of inventorship and ownership of several patents and patent applications. Ortho moved to compel arbitration, and this Court granted Ortho's motion. Affymax, Inc. v. Johnson & Johnson, 420 F. Supp. 2d 876 (N.D. Ill. 2006). After more than four years, a three-member arbitration panel issued an award determining the parties' rights to the contested patents and patent applications. Affymax now moves to vacate the award in part pursuant to 9 U.S.C. § 10. For the reasons stated below, the Court grants Affymax's motion in part and denies it in part.


Affymax is a drug discovery and development corporation. OMN and PRD are wholly-owned subsidiaries of Johnson & Johnson, a health care products company. In 1992, Affymax and R.W. Johnson Pharmaceutical Research Institute ("PRI"), an unincorporated division of OMN, entered into a contract called the Research and Development Agreement ("RDA"). The RDA committed Affymax and PRI to conducting joint research to develop peptide compounds*fn1 with potential pharmaceutical applications. It provided that inventions created in connection with this research would be the property of the creating party, with joint inventions to be jointly owned. It also contained a provision mandating arbitration of claims and controversies arising from the agreement.

On September 23, 2004, Affymax filed an action in this Court seeking correction of inventorship and ownership of certain patents and patent applications owned by Ortho. Ortho counterclaimed for a declaratory judgment that Affymax's claims were subject to arbitration based on the terms of the RDA and moved to compel arbitration. On February 28, 2006, the Court granted Ortho's motion and stayed the case pending arbitration. Affymax initiated a demand for arbitration with the American Arbitration Association ("AAA") on April 12, 2006. The AAA appointed a three-member arbitration panel, which oversaw more than two years of fact and expert discovery and conducted a thirty-five day evidentiary hearing in the fall of 2009. The panel later received briefing from the parties on the various issues addressed at the hearing.

On October 4, 2010, the panel issued its arbitration award. The panel ruled that Affymax and Ortho jointly invented, and thus are joint owners of, U.S. Patent No. 5,986,047 (the "'047 patent"), U.S. Patent No. 5,830,851 (the "'851 patent"), U.S. Patent No. 5,773,569 (the "'569 patent"), and U.S. Patent Application No. 11/855,948 (the "'948 application"). The panel also ruled that Ortho's scientists were the sole inventors of U.S. Patent No. 5,767,078 (the "'078 patent"), making Ortho the sole owner of that patent. Because the panel found that ownership of a patent "extends to any additional U.S. or foreign patent or patent application claiming the benefit of the filing date of such a patent or patent application and having at least one claim that is fully enabled under U.S. patent law by that disclosure," the panel's award granted Ortho sole ownership of European Patent Application No. EP 96/918,317, Japanese Patent No. 3,998,043, Australian Patent No. 732,294, Australian Patent Application No. 2004/203,690, Canadian Patent Application No. 2,228,277, and Mexican Patent No. 203,378 (collectively the "foreign patents"). Pl.'s Mem., Ex. 1 at 1 (hereinafter "Award").

Affymax has moved to vacate the panel's award. It argues that the panel "manifestly disregarded the [RDA] and U.S. patent law, and based its decision on assumed 'facts' that are actually contrary to the undisputed evidence." Pl.'s Mem. at 1. Affymax seeks to vacate the award to the extent that it granted Ortho sole inventorship of the '078 patent and the foreign patents.


"When parties seek judicial review of an arbitrator's award, the role of the courts, both district and appellate, is extremely limited." United Food & Commercial Workers, Local 1546 v. Illinois-American Water Co., 569 F.3d 750, 754 (7th Cir. 2009). In this case, Affymax seeks relief pursuant to 9 U.S.C. § 10 and argues that the panel manifestly disregarded the law when it rendered its decision. In the Seventh Circuit, review of an award pursuant to this standard "encompass[es] only two scenarios: (1) an order requiring the parties to violate the law; or (2) an order that does not adhere to the legal principles specified by the contract." Halim v. Great Gatsby's Auction Gallery, 516 F.3d 557, 563 (7th Cir. 2008). As such, "[f]actual or legal error, no matter how gross, is insufficient to support overturning an arbitration award." Id.; see also Bavarati v. Josephthal, Lyon & Ross, Inc., 28 F.3d 704, 706 (7th Cir. 1994) ("[W]e do not allow the disappointed party to bring his dispute into court by the back door, arguing that he is entitled to appellate review of the arbitrators' decision."). Courts should "not set aside an arbitral award so long as the arbitrator interpreted the parties' agreement at all." Prostyakov v. Masco Corp., 513 F.3d 716, 723 (7th Cir. 2008) (emphasis in original).

Affymax presents four bases for overturning the arbitrators' award: first, the panel failed to determine inventorship of the contested patents using claim-by-claim analysis; second, the panel failed to apply binding case law on inventorship, including Vanderbilt Univ. v. ICOS Corp., 601 F.3d 1297 (Fed. Cir. 2010), in its inventorship analysis; third, the panel mistakenly assumed that no document trail linked Affymax's scientists to the claimed inventions in the '078 patent; and finally, the panel impermissibly considered other legal doctrines in its inventorship analysis, including novelty, priority, and enablement.

1. Claim-by-claim analysis

Affymax first argues that the panel failed to examine every claim of the contested patents in determining inventorship, but instead "abruptly ended its analysis" after reviewing only two of the '078 patent claims, and therefore erroneously "conclud[ed] that Affymax scientists didn't contribute to any of the claims" of that patent or the foreign patents. Pl.'s Mem. at 13.

Contrary to Affymax's argument, the award indicates that the panel considered all of the claims of the '078 patent. As a preliminary matter, the panel expressly acknowledged its duty to consider "each claim of each patent" in determining inventorship. Award at 3. The panel then provided detailed explanations regarding why the claims of the '569 patent, the '851 patent, the '047 patent, and the '948 application demonstrated that these patents define joint inventions of Affymax and Ortho. Id. at 3-4. Turning to the '078 patent, the panel noted that "[c]laim 1 of [the '078 patent] defines a method that does not rely upon the core sequence for novelty. All of the remaining claims of the '078 patent depend from claim 1." Id. at 4 (emphasis added). The plain text of the award reveals that the panel contemplated all of the '078 patent's claims.

Affymax argues that the panel should have explained its reasoning regarding every claim of every patent, including the foreign patents. But the absence of a detailed explanation of the panel's reasoning is not grounds to vacate the award. First, the RDA contains no provision that required the panel to explain its rationale in detail. Cf. ARCH Devel. Corp. v. Biomet, Inc., Nos. 02 C 9013, 03 C 2185, 2003 WL 21697742, at *1 (N.D. Ill. July 30, 2003) ("[I]t was decided amongst the parties, the AAA and the Arbitrator that the Arbitrator was to render a 'reasoned award'"). Second, an arbitration panel is not generally required to provide a detailed explanation of its reasoning. Wellons, Inc. v. T.E. Ibberson Co., 869 F.2d 1166, 1169 n. 1 (8th Cir. 1989) ("An arbitration award need not contain any detailed description of the arbitrators' findings"); Shearson Hayden Stone, Inc. v. Liang, 653 F.2d 310, 312 (7th Cir. 1981) ...

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