Fall 2009-Winter 2010

In This Issue

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Message from the Deputy General Counsel

Welcome to a new decade! Or is it? Apparently some hold that since there was no year “0,” the first decade was 1-10, the second 11-20, and so on, and, thus, the next decade will not start until 2011. Whatever your view on that important controversy, the next ten years should be as challenging as the last ten.

In the coming years, there will be many stresses in higher education, but also opportunities, as we deal with emerging modes of learning, the globalization of education, worries about safety and security, health care pressures, and other challenges, foreseen and unforeseen, all in a struggling economy with tightening higher education budgets. And it is exceedingly unlikely in these times that legislative, regulatory, or public oversight of higher education will lessen, or that our culture’s propensity for litigation and blame-shifting will diminish. From deftly helping successfully guide our institutions in the pursuit of the opportunities, to minimizing exposure to damages brought on by the challenges, sound legal advice will be as important as ever to our institutions. It will be tough, but interesting work, and our System lawyers will be in a position to make a very positive and important difference for the University of Texas System’s “Nine Universities, Six Health Institutions, and Unlimited Possibilities.”

Last year was a solid one for our System lawyers, closing out with a lot of hard work and another successful legal conference. The conference was again very well received and, as always, provided not only some sound legal training, but just as important, an opportunity for colleagues across the System to share experiences and build relationships.

This issue of the Foreseeable Future, the first of the new decade or the last of the old decade, depending on your historical view, covers a variety of topics that we hope you will find informative. First, an updated catalog checklist is introduced and notice is provided that OGC will now only review catalogs once every two years instead of annually. In what we think is an important development for our students, new OGC guidelines that enable institutions to provide legal defense of students under certain limited conditions are announced. The current legal lay of the land in affirmative action is explained. Specifically for our health care lawyers, we have an update on “the patient safety movement.” Some of the intricacies of contracts for “public works” are highlighted. An important patent litigation matter is described. And, finally, we introduce the new name and guidelines for our former “Claims & Bankruptcy” section. We hope you find this helpful reading.

Best wishes for 2010!

Dan Sharphorn

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Updated Catalog Checklist and Catalog Reviews

by Priscilla Lozano (General Law)

The university catalog is an official university document.  In addition to informing the university community about academic programs and courses offered by the university, it provides useful information about university policies and procedures, (including those related to admissions, academics, tuition, financial aid and discipline) and many times use disseminating information to prospective and current students on a variety of topics as required by state and federal law.   In short, the catalog provides information regarding most aspects of the relationship between the student and the university and therefore it is important to recognize the legal implications associated with such a document.

Some courts have held that the university catalog can constitute a contract. See University of Tex. Health Sci. Ctr. v. Babb, 646 S.W. 2d 502 (Tex. App.—Houston [1st Dist.) 1982, no writ).   While litigation specifically asserting a breach of contract claim based on statement(s) made in a catalog has been a rare occurrence at UT System institutions, when lawsuits have been successfully defended it has been because the catalog contained critical legal language. See Eiland v. Wolf, 764 S.W.2d 827, 838 (Tex. App. Houston [1st Dist.] 1989, writ denied); See also Tobias v. The University of Texas at Arlington, et al., 824 S.W. 2d 201, 211 (Tex. App. —  Forth worth 1992).   Further, the catalog is a document with state and federal law compliance implications.  UT institutions have strong compliance programs to achieve compliance with state and federal law requirements; nevertheless, the significance of the document should not be overlooked.  Frequent updating of information by the individuals who are the sources of the information, catalog coordination and review by high-level administrators, and periodic legal review of the catalog is a necessity.  

Web-based catalogs are subject to the same concerns and standards as traditional catalogs.  While URL links are a convenient and efficient way to maneuver through information, institutions must remember that information within the cited webpage must be accurate and easily accessible.  Additionally, an archival version of the online catalog by academic year must be maintained for litigation, audit and historical purposes.

The Office of General Counsel provides its institutions with a vital resource - the legal review of catalogs.  To make this process effective and efficient, OGC developed a catalog checklist.  Recently, the checklist was revised to reflect recent legislative action and is available at http://www.utsystem.edu/ogc/checklists/catalogchecklist. The primary focus of the catalog legal review is to ensure that certain information is included in the catalog, that the language is clear, and that it does not contain inconsistencies, misstatements or overstatements.  Accordingly, a catalog review is not a substitute for obtaining UT System review and approval of institutional policies and procedures.  The proper procedure for obtaining UT System review of policies and procedures is found in the institutional Handbook of Operating Procedures HOP Amendment Approval Process.  Similarly, the catalog checklist and review is not a substitute for obtaining required UT System approvals for tuition and/or fee increases, or for reviewing compliance with state and federal law which is a function of the institutional compliance office. 

Traditionally, catalogs have been submitted annually for OGC review.  However, effective immediately, an OGC legal review will be required every two years.  Catalogs should be submitted  for review to OGC Intake (OGC_Intake@utsystem.edu) in the academic year following the regular session of the Texas Legislature.  This method of submission will ensure that the appropriate Executive Vice Chancellor is notified and that an OGC attorney is assigned.  For the year in which an OGC catalog review is not required, the institution should submit a certification to OGC that it has complied with the checklist. As always, OGC is available to assist with any catalog issues in addition to regular required review.

The Bottom Line:  An updated catalog checklist is available on the OGC website.  All catalogs must be submitted for review at least every two years. Catalogs should be submitted for review to OGC Intake.

If you have any questions regarding this article, please contact Priscilla Lozano by email or at (512) 499-4489.

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Providing Legal Representation for Students

by Dan Sharphorn (Associate Vice Chancellor and Deputy General Counsel)

From time to time, questions arise about the ability of the Attorney General (AG), or the UT System or any UT institution to provide legal representation for students who become involved in legal proceedings as a result of their actions taken on behalf of UT.  There are a number of situations we might find sufficiently compelling to justify providing such representation.

For example, a student who, in good faith, reports to the appropriate university official suspected misconduct by another student or by a staff or faculty member might then be sued for defamation or tortuous interference by the person they reported. Reporting suspected misconduct is precisely the sort of responsible behavior UT wants to encourage from all members of our community, including students, and many of our policies explicitly state this desire.  It is important that we protect from harm those who uphold these standards and not leave them on their own when they are attacked.

Another compelling example is the case of a student, again acting in good faith, who is appointed to an official university committee that renders a decision to which someone objects, and the objecting person then sues the student as a member of the committee.   There are a number of ways in which our students can play important roles on official university committees, and they should not be discouraged from doing so by the possibility of being on their own if they are sued.  Indeed, the limitation on defending students in such cases has dampened our willingness to create student honor committees or to permit our students to participate in other student disciplinary matters - matters in which they have a vested interest.  These student roles are common practice in academe and are seen as important educational tools, as well as inducements for students to take greater ownership of their behavior.    

Other possibilities include students being sued or investigated pursuant to their actions on behalf of the university during official university activities, such as participation on student trips or in student athletics.  All of these present circumstances where, with the right set of facts, common sense and fair treatment of our students would urge us to provide them with some level of legal representation.

During the past year, we have been discussing this issue within OGC and with the AG’s office.  We are pleased to be able to report that, while the AG has stated that their office is constrained by law to only represent State employees and, thus, cannot represent students, we have determined that UT can, under certain circumstances, pay for outside legal representation out of non-appropriated funds, in accordance with internal guidelines that we have developed.  We anticipate these cases to be rare – no more than one or two per year throughout the System.  The non-appropriated funding in these cases would come from the relevant institution, necessitating a determination by the campus President or his/her delegate if institution interests are at stake.

As you can see from the guidelines, the student must have acted in good faith furthering an identified public purpose.  We believe that purpose is clearly evident in the kinds of cases described above: protecting students who come forward in good faith to report misconduct or who serve the university in some quasi-official capacity, such as serving on a university committee.  Students seeking representation must complete and submit a request.  The request makes it clear that UT retains control over litigation and settlement strategies, the student must fully cooperate, UT is only paying for the defense and is not indemnifying the student, UT can revoke representation at any time and seek repayment if it is determined that the student did not act in good faith and/or is not fully cooperating, and the student has the right to employ personal counsel at his or her own expense.  Payment of legal representation of a student must be approved by the UT institution president, the General Counsel, and the relevant Executive Vice Chancellor.

The Bottom Line:  We think this new procedure for representation of students adds an appropriate and important protection for our students.  Links to the Guidelines and the Agreement can be found on the General Law Section page of the OGC website.

If you have any questions regarding this article, please contact Dan Sharphorn by email or at (512) 499-4370.

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Grutter and UT System: Bringing Affirmative Action into Focus

by Kent Kostka (Claims & Financial Litigation)

The U.S. Supreme Court, in the landmark decision Grutter v. Bollinger, 539 U.S. 306 (2003), gave badly-needed clarification to affirmative action, an area of law long clouded by seemingly-contradictory court rulings and heated, emotional debate.  In a complex ruling, the Court affirmed that the need for diversity in higher education can justify race-conscious action, while also imposing important limitations on such activities.  This case gives new guidance for UT institutions not only with respect to affirmative action in admissions policies, but also in the areas of scholarships and hiring.

Addressing the constitutionality of affirmative action in college admissions for the first time in 25 years, the Court in Grutter held that “student body diversity is a compelling state interest” and that good-faith attempts to reach a “critical mass” of minority students can be constitutionally permissible, but only under certain circumstances and with appropriate oversight and ongoing review. In contrast to previous rulings that equated race with diversity of viewpoint, the Court held that educational institutions have the discretion to strive for a student body that is likely to have unique life experiences for the purposes of breaking down stereotypes and allowing the institution to better prepare its students to succeed in “an increasingly diverse workforce.”  Thus, rather than justify an affirmative action program on the basis of academic freedom, schools can now, under certain circumstances and only with appropriate safeguards, implement programs geared to providing a practical benefit to students as well as the overall workforce of the state.  Finally, the court repeatedly noted that such programs much be “forward-looking” and “limited in time.”

The Court did not simply accept deference to academic institutions wishing to implement affirmative action programs, but rather brought into focus many of the blurry shades of gray that have frustrated administrators for decades.  The issue at hand in Grutter was the use of a race-conscious admissions program at The University of Michigan law school.  In defining when such action is permissible, the Court gave a clear signal that institutions of higher education must tailor such programs carefully and use a holistic and deeper form of applicant evaluation than past schemes that have simply given a pure quantitative bonus to minorities.  The “whole file” approach, or “individualized review,” must be “flexible enough to consider all pertinent elements of diversity in light of the particular qualifications of each applicant, and to place them on the same footing for consideration, although not necessarily according them the same weight.”  In a closely-related case, the Court held that Michigan’s use of a less holistic, points-based affirmative action plan for undergraduate admission was essentially a “quota system,” and therefore unconstitutional.  Gratz v. Bollinger, 539 U.S. 244 (2003).

For UT institutions considering the use of race in admissions, or seeking to develop an admissions policy that promotes or encourages diversity, the Grutter case offers clarity as well as guidance.  Although such policies nonetheless remain subject to the highest form of judicial scrutiny, and cannot be implemented lightly or without careful planning and an ongoing review process that assumes that any race-conscious plan is temporary, educational institutions that wish to develop a plan to enhance student body diversity can now do so with more confidence and guidance as to how to craft such a program within the confines of the law.  The Office of General Counsel has staff attorneys who are well-versed in the intricacies of this subject and who can assist your office with any questions or concerns you may have.

In addition to admissions, the Grutter case has implications for the use of scholarships as a tool for minority recruitment.  As with the issue of admissions, race-conscious, but not race-exclusive, scholarships can be offered when structured carefully and with clear goals in mind.  Holding that the use of such scholarships can further the compelling government interest in diversity, the Court held that race-conscious scholarships that use the “whole file” holistic approach are far more likely to pass constitutional muster than race-exclusive scholarships, because true diversity means considering each candidate’s individual ability to contribute to the diversity and mission of the school rather than relying upon one element of a student’s demographic profile to ostensibly create beneficial diversity.

Although Grutter emphasized the unique aspects of affirmative action in the academic environment, the opinion refocused the justification of affirmative action from merely promoting diversity of opinion in academia to a desire to promote the effectiveness of public institutions and encourage societal participation by all groups, and therefore affirmative action in employment was strongly implicated by the opinion.  Even the dissent acknowledged that if the admissions plan at issue in the case was constitutional, so would be a civil service program encouraging diversity in the workforce.  Nonetheless, the threshold for the constitutionality of affirmative action in hiring remains significantly higher than for academic decisions, and UT institutions wishing to promote diversity in the workplace should consult with the Office of General Counsel to discuss what options exist for the promotion of your goals within the boundaries of the law.

The Bottom Line: Grutter reaffirmed the validity of carefully tailored race-conscious admission and scholarship programs designed to promote diversity in student body populations.  Such programs should involve a holistic, comprehensive review of each student’s file and her/his potential to contribute to the institution’s educational mission.  Quotas or flat numerical bonuses for minority applicants remain unconstitutional, and any institution wishing to develop a program to increase or preserve diversity should consult with the Office of General Counsel before moving forward.

If you have any questions regarding this article, please contact Kent Kostka by email or at (512) 499-4462. 

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Progress in UT System's Patient Safety Movement

by Lannis Temple and Melodie Krane (Health Law)

As predicted in the Winter 2006/Spring 2007 issue of The Foreseeable Future, “The patient safety movement will dominate healthcare and health law for the foreseeable future.”

Under the leadership of Executive Vice Chancellor for Health Affairs Dr. Kenneth Shine and the governing committee of the UT System Professional Medical Liability Benefit Plan (Dr. Kenneth Shine, Dr. Scott Kelley, Barry Burgdorf), which has allocated funds to support patient safety initiatives and thereby reduce liability of the Plan, the UT health institutions are actively engaged in the patient safety movement with assistance from the Office of General Counsel, Health Law Section.  Dr. Shine was President of the Institute of Medicine in 1999 when the Institute issued its now-famous “To Err Is Human” report, which helped spawn the national patient safety movement.  This report was followed by a 2001 Institute of Medicine report “Crossing the Quality Chasm”, that identified safety and effectiveness as key components of healthcare quality while also identifying substantial deficiencies in these areas in the U.S. healthcare system.

Dr. Eric Thomas of The University of Texas Health Science Center at Houston, a nationally recognized patient safety expert, was appointed by Dr. Shine to chair the UT System Patient Safety Task Force, comprised of representatives from each UT health institution.  This Task Force, counseled by Melodie Krane and Lannis Temple from OGC, drew up a master plan for raising patient safety awareness and promoting patient safety across UT System.  The Board of Regents approved funding for a four-pronged UT System approach to patient safety:  Clinical Safety and Effectiveness (CS&E) training, a competitive grants program for clinical effectiveness, training for effective implementation of each institution’s policy requiring disclosure of unintended outcomes to patients and their family members, and development of a UT System Patient Safety Organization.

Clinical Safety & Effectiveness Courses

Prior to the UT System Task Force appointment and funded by an external grant, a Clinical Safety and Effectiveness training course had been developed and implemented in 2006 by Sherry Martin, then a professor at The University of Texas M.D. Anderson Cancer Center.  After the first two years, the course resulted in 83% of graduates initiating new clinical projects, with 16% resulting in publication or presentation of the project results.  The return on investment was projected to be greater than $2 million. 

With the approval by the Board of Regents of a UT System patient safety initiative in 2008, the CS&E course was extended to each UT health campus.  The purpose of the CS&E course is to provide physicians with the skills and knowledge required to lead initiatives in patient safety through the development and implementation of clinical practice projects.  With expansion of the course to all campuses, organizational learning would be enhanced with the sharing of project results.

To provide further opportunity for the transfer of learning and applicable best practices across the UT System, The University of Texas Clinical Safety and Effectiveness Inaugural Conference and Recognition Dinner took place October 15-16, 2009 in Austin. The conference featured presentations from programs implemented at each UT health institution, with statistical data documenting improved clinical outcomes. Conference participants also decided to design and implement the first CS&E project simultaneously involving all UT institutions.

Two grants were awarded at the Recognition Dinner for the best patient safety and efficiency initiatives: “Improving Blood Product Delivery to the Operating Room for Pediatric Cardiothoracic Surgery,” with Felix W. Tsai, M.D., as lead presenter, from UTHSCH-Children's Memorial Hermann, and “Ventilator Associated Pneumonia Reduction in a Medical ICU,” with Bela Patel, M.D., and Tammy Campos, RN, MSN, as lead presenters with UTHSCH-Children's Memorial Hermann.

Disclosure Training

While physicians are trained to discuss treatment and care with patients, there is growing recognition that the disclosure of unanticipated outcomes to patients and families is an art that requires preparation.  A subcommittee of the Patient Safety Task Force solicited proposals from outside contractors to provide training at each UT health institution on properly handling the process of disclosing unintended outcomes to patients.  After careful consideration, the subcommittee chose RMF (Risk Management Foundation) Strategies, an experienced medical malpractice company owned by and serving the Harvard medical community, to individualize disclosure training programs for each of the diverse UT health institutions.  RMF Strategies is working with each UT institution and is currently scheduling the delivery of live training programs starting this spring.  In-depth training of approximately 20 disclosure coaches will be held at each campus, along with assessment and follow-up.

Patient Safety Grants

Proposals for specific clinic projects in research, education, and clinical collaboratives were solicited by a subcommittee of the Patient Safety Task Force, resulting in submission of 23 proposals.  Experts from outside the UT System evaluated the proposals and awarded three research grants of $100,000 each, four education grants ranging from $50,000-$125,000 each, and one clinical collaborative grant of $60,000.  Funding is available for two additional proposal cycles.

Patient Safety Organization

With the passage of the U.S. Health and Human Service’s final rule implementing the Patient Safety Act, the Patient Safety Task Force has studied the numerous alternatives available for starting or joining an existing Patient Safety Organization (PSO) devoted to collecting patient safety data and determining best practices to improve patient safety.  The Task Force has preliminarily recommended that UT System join an existing PSO with a final decision in the coming months.

The Bottom Line:  In an effort to improve the quality of patient care in a comprehensive manner, UT System and UT health institutions are strongly committed to the patient safety movement and are becoming national leaders in patient safety through a variety of imitative programs.

If you have any questions regarding this article, please contact Lannis Temple by email or at (512) 499-4630, or Melodie Krane by email or at (512) 499-4482.

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Contracts for "Public Works"

by Mark Gentle and Edwin Smith (Business Law)

Correctly identifying a construction project as a “public work” is important because there are specific statutory requirements that apply to public works, such as the duty to obtain a payment bond from the general contractor.  However, a recent decision by the Tenth District Court of Appeals (Waco) highlights the ambiguity in Texas law concerning the definition of “public works” in the context of governmental contracting.  This article will discuss the grey areas of public contracting, including environmental remediation and other projects not directly tied to “construction” or “repair” of a public building, for guidance on whether or not the Texas courts consider those projects to be public works.   

The case of LA Ash, Inc. v. Texas A&M University, 2008 WL 4742135 (Tex. App.-Waco), involved a contract between Texas A&M University and EOG Environmental Inc. for the removal and disposal of contaminated water and residue in a retention pond containing fire retardant at the A&M fire-training school.  LA Ash, a subcontractor to EOG, sued A&M for its failure to require EOG to provide a payment bond for the project.  The Court addressed the issue of whether remediation of the pond was within the definition of “public work” under Chapter 2253, Tex. Gov’t Code. (This law is commonly referred to as the McGregor Act and requires a governmental entity entering into a public work contract with a prime contractor in an amount greater than $25,000 to obtain a payment bond from the prime.  If the bond is not obtained, the governmental entity is subject to the same liability as the surety would have under a payment bond on the project.)  The Court in LA Ash concluded that the contract between A&M and EOG was a services contract and not a public works contract under the McGregor Act.  The Court reasoned that the pond remediation project is not a public work because there were no repairs or improvements to a public building and no construction of a permanent fixture involved.

While the LA Ash decision provides a fairly comprehensive review of the Texas cases addressing the question of the term “public work” under the McGregor Act and includes a summary of some out-of–state authority as well, the analysis of this Court should be viewed with caution.  There are other important factors that should be considered when determining whether any particular project is a “public work.”  Some of these considerations are discussed, below.

First, as noted by the Court in LA Ash, the McGregor Act does not contain a definition of “public work.”  However, the McGregor Act is a remedial statute that should “receive the most comprehensive and liberal construction possible to achieve its purposes.” LA Ash Inc. v. Texas A&M University, No. 10-07-00388-CV Oct. 29, 2008, 2008 WL 4742135 (Tex.App.-Waco) at 2.  This statement of law is not in dispute, but it opens the door for another court examining similar facts to reach the opposite conclusion of the court in LA Ash.

Second, the Court concluded that “public work” as used in the McGregor Act’s predecessor statute is “akin to building contracts,” but did not address whether “building contracts” is a defined term under current Texas law. Id, at 3.  Citing Employers’ Casu. Co. v. Stewart Abstract Co., 17 S.W. 2d 781 (Tex. Comm’n App. 1929, judgm’t adopted). Institutions evaluating a project that may fall in the grey area between “construction” and “service” should consider the definition of “building or construction” provided in Section 406.096 of the Texas Labor Code. This statute provides that “building or construction” includes:

  • erecting or preparing to erect a structure, including a building, bridge, roadway, public utility facility, or related appurtenance;
  • remodeling, extending, repairing, or demolishing a structure; or
  • otherwise improving real property or an appurtenance to real property through similar activities.

Third, the Court relied upon a Louisiana case for the proposition that removal of excavated soil is not recognized within the definition of a public work contract. The LA Ash Court at page 3 cites Barabay Property Holding Corp v. Boh Bros. Const. Co. L.L.C., 991 So. Sd 74, La. App. 1 Cir., 2008); however, the analytical context of this holding does not appear germane to the facts of the A&M case.  However, the Court failed to consider that Section 2258.002 of the Texas Government Code (regarding the applicability of prevailing wage rate requirements to public works) states that public work, “include[s] a building, highway, road, excavation, and repair work or other project development or improvement, paid for in whole or in part from public funds. . . .”

Finally, even though the Texas Board of Professional Engineers (TBPE) has a vested interest in expanding the scope of the definition of “public works” (since professional engineering services are generally required on public works), its view of the definition of public works is informative, if not controlling.  In a Policy Advisory Opinion dated February 8, 2007, relating to Record Drawings, the TBPE states the following:

         Public works: The Board has identified specific examples of projects that are considered public works. The attorney general has issued several opinions that include the following definition:

         The term "public works" embraces all construction and improvements, ordinarily of a fixed nature, designed for public use, protection or enjoyment. Clearly included among public works are bridges, school buildings, waterworks, dams, sewers, canals and channels, levees and sea walls, wharves and piers, irrigation, reclamation and drainage projects, and highways and streets.

Upon questioning its source for this statement attributed to the Attorney General, representatives of the TBPE allowed that they were not aware of any formal AG opinion adopting this definition but asserted that this had been provided to them in informal communications with lawyers in the Attorney General’s office.

The Bottom Line:  The term “public work” may apply to a wide range of projects beyond the construction, repair or improvement of a public building.  Relying on a limited definition of “public work” could expose the institution to the risk of being non-compliant with a variety of statutory requirements, each with its own penalties and liabilities.  If you have a potential project that falls into the grey area between construction and services, such as remediation, landscaping, cabling or similar projects that may require bonds, workers’ compensation insurance and the payment of prevailing wage rates, you should contact OGC for a pre-solicitation discussion of the proposed activity and how it should be categorized or could be properly restructured.

If you have any questions regarding this article, please contact Mark Gentle by email or at (512) 499-4502, or Edwin Smith by email or at (512) 499-4491.

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UT System's Decision to Join in an Amicus Brief on Written Description Requirement

by BethLynn Maxwell (Business Law, IP Practice Group)
with contributions by Christine Pavalasky (Legal Administrative Assistant, Business Law)

On October 15, 2009, The University of Texas System, along with seven other prominent research universities, including The University of California System, filed an Amicus Brief in support of MIT with the U.S. Court of Appeals for the Federal Circuit in Ariad Pharmaceuticals, et al v. Eli Lilly and Company.  At issue on appeal is whether Section 112 of the United States Patent Act contains a written description requirement separate from an enablement requirement, and if so, what is the scope and purpose of the requirement?

Background

Section 112 of the United States Patent Act states, “The specification shall contain a written description of the invention, and the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same ….”

Before 1997, the written description requirement was used as a tool to police priority dates by preventing the addition of new matter to old disclosures.  However, in 1997, the Federal Circuit expanded the role of the written description  requirement and singled out chemical and biotechnology patents by requiring that the written description provide a “precise definition, such as by structure, formula, chemical name, or physical properties, [and] not a mere wish or plan for obtaining the claimed chemical invention.” (Regents of the University of California v. Eli Lilly and Co., 119 F.3d 1559 (Fed. Cir. 1997)). 

Since Eli Lilly, the court has repeatedly held that Section 112 includes a written description requirement separate and distinct from the enablement requirement and further reinforced the high written description standard placed on chemical and biotechnology patents. 

However, in 2002, the court reversed its decisions which added more evidence that the decision in Eli Lilly was wrong (Enzo Biochem, Inc. v. Gen-Probe, Inc., 285 F.3d 1013 (Fed. Cir. 2002)).

In April 2009, the written description requirement controversy continued when the Federal Circuit invalidated claims on written description grounds and did not discuss enablement.  In a concurrence, Judge Linn stated that the court’s “engrafting of a separate written description requirement onto Section 112, paragraph 1 is misguided.”  Based on Judge Linn’s statements, the patentee for Ariad requested an en banc rehearing.

Based on the facts, The University of Texas System decided to join The University of California System and other research universities in filing an Amicus Brief with the U.S. Court of Appeals for the Federal Circuit to support MIT, Harvard and the Whitehead Institute and their exclusive licensee, Ariad Pharmaceuticals, in their patent infringement case against Eli Lilly.

Argument on Appeal

The Federal Circuit’s creation of a separate barrier to patentability in Eli Lilly effectively imposes an actual reduction to practice requirement on biotechnology inventions which is not supported by the language of Section 112 or established law.  This “super-enablement” standard prejudices universities and research institutions – most of which do not have the resources to support the time and labor-intensive process of reducing every species of a genus to practice, or describing every possible amino acid or DNA sequence in exhausting detail as needed to “precisely define” and adequately describes  biological inventions.  Further, this “super-enablement” standard is contrary to established law and frustrates federal policy regarding patent exclusivity for pioneering biological inventions. 

The grant of patent exclusivity to pioneering biological inventions is key to fueling the creation and recruitment of commercial entities willing to undertake the huge investments necessary to refine and develop foundational university research into medical and biopharmaceutical products widely accessible to the general public -- particularly with technologies such as pharmaceuticals, where long development times and major investments are usually required before commercialization. 

Denial of such protection for university inventions removes the incentive for private investment in commercializing biotechnological inventions, thereby keeping important and possibly life-saving advancements out of the public’s reach and depriving universities and research institutions of the opportunity to generate funds for continued scientific research, education, and innovation.  If unable to secure patent protection for these inventions, universities will have little choice but to leave many of their pioneering discoveries undeveloped and outside the reach of the general public.

It was Congress’ goal in passing the Bayh-Dole Act to use the patent system “to promote collaboration between commercial concerns and nonprofit organizations, including universities,” and “to ensure that inventions made by nonprofit organizations are used in a manner to promote free competition and enterprise,” (35 U.S.C. §200). 

In fact, in 2007, universities executed over 5,000 technology licenses to private companies for further development and commercialization of university research.  Such licensing efforts were responsible for the formation of 555 new startup companies, totaling almost 3,400 ongoing startup companies created from the transfer of university-developed technology out of the laboratory and into the marketplace. 

A statutory interpretation of the written description requirement that unfairly prejudices biotechnology and university inventions impedes this growth and frustrates the goals of the patent system.

The Amicus Brief expertly argues (and requests) that the written description requirement be returned to its role in the context of determining entitlement priority, and that it should only be used to ensure that later-filed claims are entitled to the benefit of an earlier filing date or to ensure that later amendments do not run afoul of the prohibition against adding new matter to the original application.

Eli Lilly will be argued before the U.S. Court of Appeals for the Federal Circuit late spring 2010.

The Bottom Line:  The University of Texas System and the other research universities that joined in the Amicus Brief filed in October, 2009 will have to wait and see which way the U.S. Court of Appeals for the Federal Circuit decides in the Eli Lilly en banc rehearing. We are hopeful that the court will respond to our concerns by reducing or eliminating the ‘super-enablement” standard.

If you have any questions regarding this article, please contact BethLynn Maxwell by email or at (512) 499-4518.

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New Name, Same Game

by Traci Cotton (Claims & Financial Litigation)

Effective December 1, 2009, the Claims & Bankruptcy section officially changed its name to Claims & Financial Litigation – to more accurately describe the broader nature of the work performed by the section and to reflect the litigation authority granted to the section by the Texas Attorney General. The section also changed its fee structure and referral process, effective December 1.  Notification regarding these changes was sent to all System institutions in mid-October.

In 2003, the section was placed on a fee for service model. The fees we receive from our institutions are used to underwrite the salary and other overhead costs associated with the operation of the section. For the most part, these fees had not changed since 2003. The new fees include an increased percentage to be assessed on monetary recoveries, an increase in the flat fee charged per new referral, and the adoption of a fixed fee for certain services.

Also, with the goal of providing more effective and efficient service, the decision was made to revamp the referral process. We will continue to handle the same types of matters we have worked on in the past. However, matters involving smaller disputed amounts will now be handled at the institutional level only. The section staff will continue to consult with our institutions upon request. 

Over the last three years, the work of the section has contributed to the recovery of close to $20,000,000 Systemwide. Some of our institutions have benefited from this recovery more than others, for a number of reasons. Clearly, though, if an institution does not enlist our assistance, that institution cannot benefit from any recovery. We welcome the opportunity to discuss how our services might benefit all institutions, particularly those institutions who have not utilized our services in a meaningful way in the past.

Updated Guidelines for Referral will be sent to all institutions. The Guidelines will also be available on the Claims and Financial Litigation page of the OGC website. We plan to visit each of our health institutions within the next few months to go over the new processes. We will teleconference with the majority of out academic institutions to discuss the changes. However, we are always available to conduct training as needed, where needed.

Chapter 2107 of the Government Code requires state agencies to refer past-due debts and obligations to the Attorney General. Under our delegation, this section stands in the shoes of the Attorney General, and those same matters should be referred to OGC for action, if they meet the requirements set out in the Guidelines for Referral.

The Bottom Line: System institutions are required to protect state resources, and to act with due diligence to ensure that they are fairly compensated for the services they provide. The Claims & Financial Litigation section is an important resource each institution can and should use to help it comply with this mandate. New procedures make use of Claims and Financial Litigation even more effective and efficient.

If you have any questions regarding this article, please contact Traci Cotton by email or at (512) 499-4462.

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Office of General Counsel
201 W. 7th Street
Austin, TX 78701
Tel: 512.499.4462
Fax: 512.499.4523
www.utsystem.edu/ogc/