Fortuitious find helps Neuralstem win dismissal of claim

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Neuralstem Inc. can thank the discovery of a 1991 agreement among three inventors for a federal judge’s dismissal Wednesday of a multimillion-dollar claim that the Germantown-based biotech company infringed a California firm’s patent on a spinal treatment.

U.S. District Judge Roger W. Titus threw out StemCells Inc.’s allegation, saying it lacked standing to file the infringement claim because it had acquired the ownership rights of just two of the three inventors.

Federal law permits a patent to be issued when not all inventors are listed on the application. However, a patent holder must acquire all ownership rights to the patent before lodging an infringement claim, Titus stated in his memorandum opinion and order dismissing the case, which StemCells filed nine years ago in U.S. District Court in Greenbelt.

“The discovery by defendants of a terse, one-page document threw a monkey wrench into this high-stakes litigation, as it called into question whether plaintiffs had standing to bring their patent-infringement claim,” Titus wrote.

That document included the name of the third inventor and described how three — not two — researchers from the University of Calgary planned to split the royalties on the stem-cell treatment they developed.

“Three scientists walk into a lab,” Titus wrote. “They emerge with an important scientific discovery but, as is frequently the case, a contentious patent dispute later arises.”

Samuel Weiss and Brent Reynolds were to receive 45 percent each, under the 1991 accord, while Wolfram Tetzlaff would get 10 percent. However, their hoped-for deal with University Technologies Inc., the Calgary school’s marketing arm, never materialized.

Weiss and Reynolds subsequently assigned their ownership rights, which went to StemCells.

Tetzlaff retained his ownership rights but his name did not appear in any document related to the invention besides the 1991 agreement, which Neuralstem found during the litigation-related discovery process.

Neuralstem subsequently argued that StemCells lacked standing because it did not have Tetzlaff’s ownership rights.

StemCells countered that Tetzlaff should not be considered among the inventors because his contribution to the treatment’s development was insignificant, limited mainly to providing technical support.

They said, he said

The arguments before Titus came down to a case of they said, he said.

Testifying for StemCells, Weiss and Reynolds said they, not Tetzlaff, did the work which led to the discovery that neurons, when placed in a tissue culture with stem cells, not only survive but proliferate.

Tetzlaff testified that he recognized the significance of the discovery for the treatment of spinal injuries and performed experiments to prove that point.

Titus ultimately discounted Weiss and Reynolds’ testimony, noting they had a financial stake in StemCells’ success whereas Tetzlaff had no pecuniary interest in the outcome of the case.

“Specifically, Drs. Weiss and Reynolds consistently downplayed Dr. Tetzlaff’s contributions,” Titus wrote in his opinion. “In reality, Dr. Tetzlaff contributed much more than the plaintiffs and Drs. Reynolds and Weiss wish to acknowledge. His contributions to in vivo experiments, to human experiments, and his immunocytochemistry work, were critical in demonstrating the efficacy of the discovery and its practical application.”

Martin McGlynn, chief executive officer of Newark, Calif.-based StemCells, said in a statement that the company is “disappointed” by the “unexpected” decision.

“However, it is important to remember that nothing about this case has ever had any bearing on our company’s freedom to operate,” McGlynn added. “The decision does not affect StemCells Inc.’s intellectual property portfolio beyond the Weiss and Reynolds family of litigated patents, nor the ability of the company to execute its business agenda.”

Neuralstem declined to comment on the case, StemCells Inc. v. Neuralstem Inc., No. 06-cv-1877-RWT.