Levin v. Septodont, Inc.

34 F. App'x 65
CourtCourt of Appeals for the Fourth Circuit
DecidedApril 22, 2002
Docket00-2234, 00-2462, 01-1852
StatusUnpublished
Cited by7 cases

This text of 34 F. App'x 65 (Levin v. Septodont, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Levin v. Septodont, Inc., 34 F. App'x 65 (4th Cir. 2002).

Opinions

OPINION

MICHAEL, Circuit Judge.

On March 18, 1998, plaintiffs-appellants, Jules J. Levin, Roger P. Levin, and Stacey W. Levin (the Levins), agreed to sell to defendant-appellee, Septodont, Inc. (Septodont), a patent for a low irritation anesthetic and antiseptic mouth rinse (the mouth rinse), U.S. Patent No. 5,547,657 (the '657 patent). Septodont terminated its agreement with the Levins on the [67]*67ground that the mouth rinse had failed to satisfy a contractual requirement that the rinse remain stable over a shelf life of one year. The Levins then sued Septodont for breach of contract and indemnification in the United States District Court for the District of Maryland. The district court granted summary judgment to Septodont on both claims. In dealing with the breach of contract claim, the district court held that the '657 patent was invalid because it failed to name Dr. Donald Kilday as an inventor of the mouth rinse; the court therefore concluded that the agreement between the Levins and Septodont was unenforceable for lack of consideration. Because we conclude that Dr. Kilday’s contributions to the development of the mouth rinse do not make him a joint inventor, we vacate the district court’s grant of summary judgment to Septodont on the breach of contract claim and remand for further proceedings on that claim. We affirm the district court’s grant of summary judgment to Septodont on the Levins’ claim for indemnification.

I.

Dr. Jules J. Levin, a retired dentist, first thought of the idea for the mouth rinse while attending a dental trade show in 1992. There, he learned of a product called Ulcerease, a numbing cream that is used to reduce the pain caused by mouth ulcers. Levin thought there might be a market for a mouth rinse that could be used to reduce the pain caused by routine dental procedures. He soon sought help with his idea from Dr. Donald Kilday, the developer of Ulcerease. Dr. Levin told Dr. Kilday that he wished to develop a mouth rinse that, if swished around the mouth of a dental patient, would numb the soft tissues of the mouth for 15 to 20 minutes. After consulting with Dr. Levin, Dr. Kilday considered possible formulations for the product and ultimately settled on using phenol (a key ingredient in Ulcer-ease) as an antiseptic and benzocaine as an anesthetic. Early formulations of the product used alcohol as a solvent, but this proved unsatisfactory because it produced a burning sensation in patients’ mouths. Dr. Kilday recognized that this problem could be solved by suspending the benzocaine and phenol in a non-alcoholic solvent. He initially engaged Harmony Labs to develop a non-alcoholic solvent, but Harmony was unable to find a solution. Dr. Kilday then sought help from Eastman Chemical Company (Eastman). After several months of research, scientists at Eastman discovered that they could suspend phenol and benzocaine in a solution of polyethylene glycol and propylene glycol, thereby producing a mouth rinse that did not cause a burning sensation.

The Eastman scientists believed that the new, non-alcoholic mouth rinse was patentable. The Levins and Eastman agreed that Eastman would handle the patent application process for the mouth rinse and that the assignee (the record owner) of the patent would be Eastman. The Levins (through their company, J. Coleman, Inc.) received an exclusive license to use the patent with an option to have the patent assigned to it free of charge at any time. This arrangement had two important advantages for the Levins. First, Eastman bore the expense of preparing the patent application. Second, having the patent issued to Eastman rather than to Dr. Kilday or Dr. Levin would better deter potential infringers of the mouth rinse patent.

The Patent Office initially rejected Eastman’s patent application on the ground that the mouth rinse was obvious in light of the prior art. See 35 U.S.C. § 103. Eastman then amended its application to limit the scope of its claims and to emphasize that the mouth rinse’s use of a non[68]*68alcoholic, non-irritating solvent was a non-obvious contribution to the field. On August 20, 1996, the Patent Office allowed Eastman’s patent application and issued U.S. Patent No. 5,547,657 for a low-irritation anesthetic and antiseptic mouth rinse. Five Eastman scientists were listed as the inventors of the mouth rinse, and Eastman was listed as the patent’s assignee.

With the '657 patent in hand, the Levins set out to find a company to manufacture and market their mouth rinse. After unsuccessful discussions with a number of potential business partners, the Levins found a willing partner in Septodont, a dental marketing company and a distributor of dental products. Under the terms of their March 18, 1998 agreement, the Levins agreed to assign the '657 patent to Septodont and to give Septodont the exclusive right to manufacture and sell the mouth rinse. In return Septodont agreed to pay the Levins $50,000 upon the signing of the agreement, $500,000 at least 10 days prior to the launch date for the mouth rinse, additional guaranteed payments of varying amounts until the end of the patent term, and variable payments based on a percentage of Septodont’s net sales for the mouth rinse. The contract also obligated the Levins to pay for a stability test on the mouth rinse, and it gave Septodont the right to terminate the agreement and to receive a refund of all payments made to the Levins if the results of the stability test indicated that the shelf life of the product would be less than one year. The contract also included a general indemnity provision, which stated that Septodont would “indemnify and hold harmless [the Levins] against any and all lapses, fees, cost, claims, expenses and/or litigation, including reasonable attorneys’ fees and expenses, incurred as a result of any alleged or actual use or misuse of the [mouth rinse] or as a result of the transactions contemplated by this Agreement.”

Septodont began experimenting with various coloring and flavoring agents in order to ready the mouth rinse for launch, but it claims that the mouth rinse changed color after a few months. Septodont then terminated its contract with the Levins on the ground that the product had failed to meet the contract’s stability requirement. The Levins sued for breach of contract in the United States District Court for the District of Maryland, invoking that court’s diversity jurisdiction under 28 U.S.C. § 1332(a)(1). The Levins also claimed indemnification for the expenses of the lawsuit on the ground that their contract with Septodont obligated Septodont to reimburse them for all litigation expenses incurred “as the result of the transactions contemplated by this Agreement.” Septodont filed various counterclaims, including a claim for a declaratory judgment that the '657 patent was invalid because it failed to list Dr. Levin and Dr. Kilday as inventors of the mouth rinse. Septodont also argued the invalidity of the '657 patent as an affirmative defense to the Levins’ breach of contract claim, contending that the contract was unenforceable for lack of consideration because the Levins had failed to convey valid patent rights.

After discovery Septodont moved for summary judgment on the Levins’ breach of contract and indemnification claims. The district court granted the motion on both counts. The court first held that even though Dr.

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34 F. App'x 65, Counsel Stack Legal Research, https://law.counselstack.com/opinion/levin-v-septodont-inc-ca4-2002.