The Board of Regents of the University of Texas System recently asked the Texas Supreme Court to reinstate damages totaling about $51 million it was awarded by a trial court in a royalty dispute over patented technology that detects Lyme disease and is used in veterinary products.
The board filed a petition for review with the state’s high court on Monday in an attempt to undo the Fourteenth Court of Appeals’ ruling that wiped out the award against IDEXX Laboratories. The parties entered a patent-license agreement that required royalties be paid to the board from the sale of certain veterinary-testing products.
The appellate court’s ruling rests on a faulty interpretation of the contract between the university and the laboratory, the board argued in its petition, and is depriving the university of the benefit of the bargain it entered.
“Because IDEXX unambiguously agreed to pay a 2.5 percent royalty under Section 5.1(b)(iii) for products… that include a Lyme disease test ‘in combination with one or more veterinary diagnostic products or services to detect tick-borne disease(s),’ freedom of contract dictates that IDEXX be held to that agreement,” the board argued. “The court of appeals flouted this court’s precedent in holding otherwise.”
UT filed this lawsuit in Harris County in 2018, it was removed to federal court then remanded, and eventually was decided on a series of summary judgment motions.
Per the agreement, IDEXX was to pay UT under a three-tier royalty structure:
- 4 percent of net sales on products that tested only for Lyme disease.
- .5 percent to 1 percent of net sales on products that test for Lyme disease in addition to “one other” disease, such as heartworm.
- 2.5 percent of net sales on products that test for Lyme disease in addition to “one or more tick-borne diseases.”
According to court documents, Harris County District Judge Scot Dollinger entered final judgment for the UT board on Oct. 12, 2020, awarding $19.6 million in outstanding royalties, $30 million in prejudgment interest on the outstanding royalties, about $51,000 in costs and about $1.4 million in attorney fees.
Fourteenth Court of Appeals Justices Ken Wise, Charles A. Spain and Meagan Hassan issued a five-page ruling on Aug. 11 reversing that judgment after finding that the agreement between the parties was ambiguous as to what royalty rate applied to certain products.
“Because the agreement is susceptible to more than one reasonable interpretation, it is ambiguous as to what royalty rate applies to the… products,” Justice Spain wrote for the panel, explaining that some products could fall under two categories of royalty percentages. “Accordingly, the trial court reversibly erred by rendering partial summary judgment that the agreement unambiguously mandated a 2.5 percent royalty as to the… products.”
The case is The Board of Regents of the University of Texas System v. IDEXX Laboratories, case number 22-0844.