Tech Transfer Tactics recently interviewed Culhane Meadows’ Atlanta partner Scott Anderson and Dallas partner Robert Klinger to discuss the potential consequences of allegations of research fraud by the chief executive of Athira Pharma, a Washington State University biotech spinout.

Here are some excerpts from Scott and Robert’s interview:

WSU is not named as a defendant in the lawsuits, but it nonetheless could face serious consequences if the allegations are proven true, says patent attorney J. Scott Anderson, JD, in the
Atlanta office of the Culhane Meadows law firm. The mere association with such charges could be
damaging even at this stage, he says, before they are proven true or false.

The ultimate impact on WSU and the company will depend on exactly what is in the license agreement, he says. Some licenses include representations and warranties by the researcher that the research results are genuine, and some include statements that indemnify the licensee against damages if there are violations of federal law, regulations, or breaches of any assurances made by the patent owner, he notes.

The contract also can include grounds for termination of the license agreement if the research fails to pass peer review or the results are called into question in a meaningful way, Anderson says. In that case all the rights would revert back to the university and it would be as if the license never
existed, he says.

…

In other situations in which fraud is alleged but the university is not directly vested in the company’s financial success, termination can be a way to remove the university’s name from the scandal and protect its reputation, he says.

“The license should guide the university in how to extract itself from this situation. But that requires forethought about what can happen and what you would want to do in response, and not every license addresses this well,” he says. “The first line of defense for the university should be to look at what the license agreement says about termination. It should be a best practice to have a thorough part of the agreement addressing termination, to protect the university and to let the faculty and students submitting research know that if they’re going to found a start-up company, the risk is on them if there
are allegations of fraud.”

However, Anderson acknowledges that researchers are likely to push back on including termination terms for mere allegations of fraud. Robert C. Klinger, JD, an attorney with the Dallas, TX, office of Culhane Meadows, who represents researchers and start-ups in licensing transactions, says he would urge his clients to resist such a clause in the licensing agreement.

“Allegations are easy to throw. If it’s proven fraud, that’s a different thing,” Klinger says. “If I’m only accused, you can’t start taking my patent rights. It’s valuable property. If I was representing the inventor and the agreement says the university gets all the patent rights when there are allegations of fraud, I wouldn’t let my client sign that.”

The complete article can be found here.

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