Learn About the Law
Get help with your legal needs
FindLaw’s Learn About the Law features thousands of informational articles to help you understand your options. And if you’re ready to hire an attorney, find one in your area who can help.
Alain E. KALOYEROS and Ana R. Londergan, Claimants, v. STATE of New York 1, Defendant.
Defendant moves to dismiss the claim pursuant to CPLR 3211 (a) (2), (5), (7) and (8) on the grounds it is time-barred and, in any event, alleges a cause of action for which review in the Supreme Court pursuant to CPLR article 78 is the exclusive remedy. Claimants oppose the motion and cross-move for late claim relief, if necessary.
Sometime in 2000, claimants, together with Dr. Barry C. Arkles of Gelest, Inc., allegedly invented a process for creating ultra-thin layers of cobalt to be used as a component in microchips, allowing them to be made smaller, faster, and more functional than the previous generation of microchips (defendant's Exhibit A, Claim, ¶ 1).2 At the time the invention was made, claimant, Alain Kaloyeros, was a professor of physics at the State University of New York (SUNY) at Albany and the claimant Ana R. Londergan was a Ph.D. student in Dr. Kaloyeros’ research group (id. at ¶ 9 and 10). In December, 2000, claimants assigned their entire right, title and interest in the patent to The Research Foundation of the State University of New York 3 (The Research Foundation) and patent number 6,346,477 (the “477 Patent”) was issued on February 12, 2002 (id. at Exhibits J and K). Claimants allege that the assignment was made pursuant to a series of “agreements” between the claimants, the defendant and The Research Foundation designed to facilitate the management and commercialization of the invention and the realization of royalties for the benefit of both the State and the claimants in the proportion set forth in the State's patent policy (id. at ¶ 1). According to the allegations in the claim, however, defendant did nothing to commercialize the 477 Patent or to protect the 477 Patent from infringement by third-parties prior to the expiration of the patent on January 9, 2021. Claimants therefore seek damages for defendant's breach of its obligation to commercialize the 477 Patent and protect it from third-party infringers.
The Research Foundation is a non-profit corporation originally chartered by the New York State Board of Regents as a non-profit educational corporation in 1951 (id. at Exhibit B, 1977 Agreement). Pursuant to a 1977 agreement, the Foundation agreed to administer SUNY sponsored research programs and technology transfer activities (id.). With regard to the commercialization of technology resulting from academic discoveries, the duties of The Research Foundation, according to its website (see defendant's Exhibit A, Claim, Exhibit G attached thereto; see also https://www.rfsuny.org/our-work/innovation-and-partnerships/services/ information-for-inventors/), include an evaluation of the market opportunity for an invention, “the development of an intellectual property protection strategy that is implemented by your technology transfer office to ensure that your discovery is protected and secure,” “[t]he identification of commercialization and development partners that will translate your discovery into a commercial product or service,” “[t]he establishment of long-term relationships with commercialization and development partners,” collaboration with partners in product development and, finally, the introduction of new inventions to the market thereby yielding revenues generated by sales of products and services based on the discovery (id. at Exhibit G).
Pursuant to SUNY's Patents, Inventions and Copyright Policy, codified in 8 NYCRR 335.28 (hereinafter the “Patent Policy”), inventors are required to disclose their invention to SUNY and, should it result in either a patent or patent application, assign their patent or patent application as directed by SUNY (id. at Exhibit A, former 8 NYCRR 335.28 [b]). The Research Foundation's Intellectual Property Policy incorporates SUNY's Patent Policy, among other things (id. at Exhibit C). SUNY's Patent Policy, as it existed at the time of the inventions in this case,4 stated in pertinent part the following:
“All inventions made by faculty members, ․ students, and all others utilizing university facilities at any of the State-operated institutions of State University shall belong to State University and should be voluntarily disclosed․ The inventor or inventors shall make application for patents thereon as directed by State University and shall assign such applications or any patents resulting there from to or as directed by State University” (defendant's Exhibit A, Claim, Exhibit A attached thereto, former 8 NYCRR 335.28 [b]).
In consideration of the inventor's agreement to assign his or her patent or patent application to or as directed by SUNY, the Patent Policy provides for inventor compensation as follows:
“With respect to any invention obtained by or through State University or assigned to or as directed by it in accordance with the foregoing provisions, the university, in recognition of the meritorious services of the inventor and in consideration of the inventor's agreement that the invention shall belong to the university, will make provision entitling the inventor ․ to a nonassignable share in any proceeds from the management and licensing of such invention to the extent of 40 percent of the gross royalty paid” (id at Exhibit A, former 8 NYCRR 335.28 [c]).
The Patent Policy also addresses SUNY's release of its intellectual property rights stating: “The chancellor, acting with the advice of the patents and inventions policy board or State University's designated patent management agent, may determine not to file a patent application in the case of any specific invention or continue efforts at marketing. The university's decision shall be arrived at, in consultation with the inventor, within a period not to exceed six months from the date of first submission of the inventor's properly executed statement of disclosure of invention to the university or its designee. In every instance in which the university determines not to file a patent application or continue efforts at marketing, or fails to elect to do so within six months from the date of submission of said disclosure statement, all of the university's rights to the invention shall be released to the inventor, who may then file for a patent, subject only to those restrictions that may be required by an external sponsor, if any. In every instance in which the university determines to file a patent application or continue efforts at marketing, the inventor may, at any subsequent time, request the patents and inventions policy board to recommend such release. For any invention so released to an inventor, State University, at its option, shall receive 10 percent of the net proceeds, in recognition of the contribution of the State and people of New York to the support of the research which resulted in said invention. For purposes of this provision, the term net proceeds shall mean earnings to the inventor from the invention over and beyond reasonable costs incurred in the process of patent application and management” (id. at Exhibit A, former 8 NYCRR 335.28 [f] [emphasis added]).
Pursuant to the Patent Policy, claimants assigned their invention to The Research Foundation in December, 2000 and the 477 Patent was issued to The Research Foundation as assignee on February 12, 2002 (id. at Exhibits J and K). The 477 Patent listed Alain E. Kaloyeros, Ana Londergan and Barry Arkles as inventors.
Claimants allege that in the summer of 2018, Dr. Kaloyeros and Dr. Arkles learned that microchip manufacturers were using their 477 Patent technology and that this infringing activity represented a clear opportunity to negotiate a licensing arrangement for the invention and seek damages in an action for patent infringement (id. at ¶ 51). On or about September 7, 2018, Dr. Arkles, who was allegedly acting on behalf of the claimants and his company Gelest, Inc., notified the defendant of the direct and contributory infringement by third parties and was referred to The Research Foundation. (id. at ¶ 53). The Research Foundation informed Gelest that it did not have the funds to pursue infringers of jointly owned technology and was reluctant to pursue infringers with whom defendant had or was hoping to have a collaborative relationship (id. at 54). On January 4, 2019, counsel for Gelest wrote to The Research Foundation, allegedly on claimants’ behalf, “noting that the [d]efendant had not, ‘to the inventors’ knowledge, licensed or otherwise commercialized the patent’ ” throughout the entire lifetime of the patent (id. at ¶ 56). Gelest therefore asked The Research Foundation to release its rights in the invention to claimants so that they could pursue possible licensing opportunities (id. at ¶ 57). The Research Foundation declined (id. at ¶ 58). On February 27, 2019, Gelest again wrote to the Research Foundation, with a copy to SUNY, offering to purchase the entire right, title and interest in the 477 Patent for $50,000 (id. at ¶ 59). The Research Foundation declined (id. at ¶ 60) and the 477 Patent expired on January 9, 2021 (id. at ¶ 50).
Claimants allege causes of action for breach of contract and breach of fiduciary duty arising from defendant's failure to license or otherwise market the 477 Patent, and its ongoing failure to enforce the 477 Patent against third-party infringers. Claimants allege this conduct has deprived them of their share of the proceeds from the anticipated licensing of the 477 Patent in breach of the various agreements. Claimants also allege defendant failed to consult with them regarding the marketing of the invention and refused to release to the claimants its rights to the invention as required by the Patent Policy. These same factual allegations form the basis for the claimants’ cause of action for breach of fiduciary duty.
The Defendant's Dismissal Motion
Defendant contends that service of the claim on December 9, 2020 was untimely. Court of Claims Act § 10 (4) states that a breach of contract claim:
“shall be filed and served upon the attorney general within six months after the accrual of such claim, unless the claimant shall within such time serve upon the attorney general a written notice of intention to file a claim therefor, in which event the claim shall be filed and served upon the attorney general within two years after such accrual” (Court of Claims Act § 10 ).
For the purposes of the Court of Claims Act, a claim alleging breach of contract accrues when damages become reasonably ascertainable (Waters of Saratoga Springs v. State of New York, 116 A.D.2d 875, 877, 498 N.Y.S.2d 196 [3d Dept. 1986], affd 68 N.Y.2d 777, 506 N.Y.S.2d 673, 498 N.E.2d 146 ; Fairchild Corp. v. State of New York, 169 A.D.3d 643, 644, 94 N.Y.S.3d 292 [2d Dept. 2019], lv denied 33 N.Y.3d 907, 2019 WL 2439983 ; Jeda Capital-Lenox, LLC v. State of New York, 149 A.D.3d 1390, 1391, 52 N.Y.S.3d 580 [3d Dept. 2017], lv denied 30 N.Y.3d 903, 2017 WL 4697483 ). As explained by the Court in Waterman v. State of New York, 19 A.D.2d 264, 241 N.Y.S.2d 314 (4th Dept. 1963), affd sub nom. Williams v. State of New York, 14 N.Y.2d 793, 251 N.Y.S.2d 30, 200 N.E.2d 212 (1964), “[t]he expression claim accrued is not identical with the expression cause of action accrued. The claim accrues when it matures, and the words claim accrued have the same meaning as damages accrued.” (19 A.D.2d at 266, 241 N.Y.S.2d 314 [internal quotations omitted]; see also Edlux Constr. Corp. v. State of New York, 252 A.D. 373, 374, 300 N.Y.S. 509 [3d Dept. 1937], affirmed 277 N.Y. 635, 14 N.E.2d 197 ). Here, damages accrued when The Research Foundation declined Gelest's January 4, 2019 request to release the invention to the claimants. Although the precise date the defendant declined to release the invention is not pled, it may be inferred from the allegations in the claim that it occurred prior to Gelest's offer to purchase the 477 Patent on February 27, 2019. Thus, the claim filed on December 4, 2020 and served on December 9, 2020 was clearly untimely under the provisions of Court of Claims Act § 10 (4), which requires service and filing within six months of accrual. Even if the timeliness of the claim were measured from Gelest's February 27, 2019 offer to purchase the patent rights, the breach-of-contract claim is nevertheless untimely.
Claimants’ cause of action alleging breach of fiduciary duty is also untimely, regardless of whether it is governed by the 90-day limitations period applicable to unintentional and intentional torts contained in Court of Claims Act § 10 (3) and § 10 (3-b) respectively, or the six-month residual period set forth in Court of Claims Act § 10 (4) applicable to causes of action not otherwise provided for (see generally IDT Corp. v. Morgan Stanley Dean Witter & Co. 12 N.Y.3d 132, 139, 879 N.Y.S.2d 355, 907 N.E.2d 268 , rearg denied 12 N.Y.3d 889, 883 N.Y.S.2d 793, 911 N.E.2d 855 ; LMEG Wireless, LLC v. Farro, 190 A.D.3d 716, 140 N.Y.S.3d 593 [2d Dept. 2021]). Applying the latest possible date of accrual of February 27, 2019, the breach-of-fiduciary duty claim filed and served in December 2020, more than six months later, is untimely.
While the claimants contend that the defendant's refusal to either commercialize the 477 Patent or release it to its inventors prior to expiration constitutes a continuing violation, such conduct is more appropriately viewed as the continuing effects of prior unlawful conduct which does not serve to extend the date a claim accrues (see Bullard v. State of New York, 307 A.D.2d 676, 678, 763 N.Y.S.2d 371 [3d Dept. 2003]; Selkirk v. State of New York, 249 A.D.2d 818, 819, 671 N.Y.S.2d 824 [3d Dept. 1998]). Moreover, although a contract which provides for continuing performance over a period of time starts the running of the statute of limitations anew with each breach (Krog Corp. v. Vanner Group, Inc., 158 A.D.3d 914, 72 N.Y.S.3d 178 [3d Dept. 2018]), here the last possible breach identified in the claim was on February 27, 2019, thereby rendering the instant claim, served and filed more than six months later, untimely.
Accordingly, the defendant's motion is granted and the claim is dismissed.
The Cross Motion To File A Late Claim
As a threshold matter, defendant asserts the proposed claim 5 requires review of an administrative determination over which this Court lacks subject matter jurisdiction. The Court disagrees. As succinctly stated by the Appellate Division, Third Department, in Safety Group No. 194—New York State Sheet Metal Roofing & A.C. Contrs. Assn. v. State of New York, 298 A.D.2d 785, 786, 750 N.Y.S.2d 146 (3d Dept. 2002):
“To determine whether the Court of Claims has subject matter jurisdiction of a claim, the relevant inquiry is ‘ “[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim” ’ (Ozanam Hall of Queens Nursing Home v. State of New York, 241 A.D.2d 670, 671 [661 N.Y.S.2d 54], quoting Matter of Gross v. Perales, 72 N.Y.2d 231, 236 [532 N.Y.S.2d 68, 527 N.E.2d 1205]; see CPLR 7806). ‘When the damage allegedly sustained arises from a breach of the contract by a public official or governmental body, then the claim must be resolved through the application of traditional rules of contract law’ (Abiele Contr. v. New York City School Constr. Auth., 91 N.Y.2d 1, 7-8 [666 N.Y.S.2d 970, 689 N.E.2d 864]). However, when a party seeks to annul an agency's determination because it was arbitrary and capricious, then a CPLR article 78 proceeding is appropriate (see id. at 8 [666 N.Y.S.2d 970, 689 N.E.2d 864])”.
Here, claimants damages arise from the alleged breach of an implied contract, not the arbitrary and capricious determination of a public official or governmental body (cf. Matter of Gross v. Perales, supra).6 Consequently, jurisdiction reposes in the Court of Claims (see Court of Claims Act § 9 ).
Defendant also contends the proposed claim fails to meet the pleading requirements of Court of Claims Act § 11 (b) in that it fails to state the date the claim accrued. Court of Claims Act § 11 (b) requires, as pertinent here, that a claim state “the time when and place where such claim arose, the nature of same, the items of damage or injuries claimed to have been sustained and ․ the total sum claimed.” Court of Claims Act § 11 (b) does not require a claimant to allege the date the claim accrued, only the date it arose. Although the date a claim accrues is often used interchangeably with the date a claim arose, the terms are not synonymous (Matter of Geneva Foundry Litig., 173 A.D.3d 1812, 1814, 105 N.Y.S.3d 648 [4th Dept. 2019]). The date the claim arose is the date of the “ ‘mishap’ ” (id. at 1813, 105 N.Y.S.3d 648; quoting Heisler v. State of New York, 78 A.D.2d 767, 768, 433 N.Y.S.2d 646 [4th Dept. 1980]) or other event giving rise to the claim (Matter of DeMairo v. State of New York, 172 A.D.3d 856, 100 N.Y.S.3d 362 [2d Dept. 2019] [date of death]). Here, claimants set forth the dates the claim arose by alleging the dates the patent was issued and assigned, as well as the dates they requested protection from third-party infringers or a release and return of their rights to the 477 Patent. Accordingly, the proposed claim meets the pleading requirements of Court of Claims Act § 11 (b).
Turning to the merits of the late claim motion, the first issue for determination upon such a motion is whether the application is timely. An application under Court of Claims Act § 10 (6) requires that a motion to file a late claim be made “before an action asserting a like claim against a citizen of the state would be barred under the provisions of article two of the civil practice law and rules.” An action for breach of contract against a citizen of the State must be asserted within six years from the time it accrued (CPLR 213 ). A breach of contract cause of action against a citizen of the State accrues and the statute of limitations begins to run from the time of the breach (Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402, 599 N.Y.S.2d 501, 615 N.E.2d 985 ; John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544, 550, 415 N.Y.S.2d 785, 389 N.E.2d 99 ). Here, the contract was breached, if at all, when the defendant failed to commercialize the 477 Patent or release it to the claimants upon the request of Gelest, acting on their behalf, in January, 2019. The instant cross motion filed on March 1, 2021 is therefore timely with respect to the claimants’ breach-of-contract cause of action.
A cause of action alleging breach of a fiduciary duty against a citizen of the State also accrues on the date of the breach (Kaufman v. Cohen, 307 A.D.2d 113, 121 n. 3, 760 N.Y.S.2d 157 [1st Dept. 2003]) and is controlled by either a three or six-year statute of limitations. Where fraud is an essential element of the breach of fiduciary duty claim or the requested relief is equitable in nature, the statute of limitations is six years (IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d at 139, 879 N.Y.S.2d 355, 907 N.E.2d 268). Where the remedy sought is purely monetary in nature, the three-year limitations period applicable to property damage claims set forth in CPLR 214 (4) applies (id.; LMEG Wireless, LLC v. Farro, 190 A.D.3d at 719, 140 N.Y.S.3d 593). Here, like the breach-of-contract claim, the alleged breach of fiduciary duty occurred, if at all, when the defendant failed to commercialize the 477 Patent or release it to the claimants upon the request of Gelest, acting on their behalf, in January 2019. Whether the applicable statute of limitations is three or six years, therefore, the cross motion for leave to file a late claim was timely with respect to the breach of fiduciary duty claim.
Court of Claims Act § 10 (6) permits this Court, if the applicable statute of imitations set forth in article 2 of the CPLR has not expired, to allow the filing of a late claim upon consideration of the following factors: “whether the delay in filing the claim was excusable; whether the state had notice of the essential facts constituting the claim; whether the state had an opportunity to investigate the circumstances underlying the claim; whether the claim appears to be meritorious; whether the failure to file or serve upon the attorney general a timely claim or to serve upon the attorney general a notice of intention resulted in substantial prejudice to the state; and, whether the claimant has any other available remedy.” The statutory factors are not exhaustive nor is any one factor controlling (Matter of Gavigan v. State of New York, 176 A.D.2d 1117, 575 N.Y.S.2d 217 [3d Dept. 1991]). The most important factor is whether the potential claim has merit, as it would be a futile exercise to permit litigation of a clearly baseless lawsuit (Savino v. State of New York, 199 A.D.2d 254, 604 N.Y.S.2d 970 [2d Dept. 1993]). In deciding a late claim motion, the Court has broad discretion which will not be lightly set aside (Ledet v. State of New York, 207 A.D.2d 965, 616 N.Y.S.2d 831 [4th Dept. 1994]).
Claimants contend their delay in filing and serving the claim is excusable given their uncertainty with regard to the date the claim accrued and their efforts to resolve the matter through discussions with SUNY. Claimants’ uncertainty with respect to the date of accrual amounts to ignorance of the law which is not an acceptable excuse for delay in timely serving and filing a claim (Borawski v. State of New York, 128 A.D.3d 628, 629, 8 N.Y.S.3d 399 [2d Dept. 2015]). With respect to claimants’ assertion that settlement efforts were underway between May 2019 and November 2019, no proof was proffered indicating their reliance on any assurance of settlement before the expiration of the limitations period (Golia v. State of New York, 162 A.D.3d 861, 80 N.Y.S.3d 87 [2d Dept. 2018]; Matter of Best v. State of New York, 42 A.D.3d 699, 839 N.Y.S.2d 621 [3d Dept. 2007]; Prusack v. State of New York, 117 A.D.2d 729, 730, 498 N.Y.S.2d 455 [2d Dept. 1986]; Youngstown Pneumatic Concrete Co. v. State of New York, 55 A.D.2d 776, 776, 389 N.Y.S.2d 493 [3d Dept. 1976], appeal denied 41 N.Y.2d 803, 394 N.Y.S.2d 1025, 362 N.E.2d 1215 ). Nor was any explanation provided for the three-month delay that preceded the initiation of settlement discussions. Inasmuch as it is unreasonable to refrain from commencing an action based on nothing more than the mere hope of settlement, claimants have failed to establish a reasonable excuse for the delay in filing a claim.
The intertwined issues of notice, opportunity to investigate and prejudice to the State will be considered together. Claimants contend that the State had notice of the facts underlying the claim because they informed SUNY of the direct and contributory infringement of the patent in September, 2018, they commenced an action in the Supreme Court against both SUNY and The Research Foundation on February 28, 2020,7 and engaged in settlement discussions with the State in 2019 and 2020. While the State complains that it was not informed of the identity of the alleged third-party infringers or how the claimants intended to defend against allegations of patent invalidity, it does not deny knowledge of the facts of the claim or otherwise identify in what manner it would be prejudiced in the event late claim relief were granted. Neither the claimants’ alleged failure to communicate the identity of the third-party infringers nor their lack of an explanation as to how they intended to overcome allegations of patent invalidity prevented an investigation or assessment of the State's liability.
While the State contends that it was provided insufficient information to enable it to pursue the third-party infringers, it does not contend that it was unaware of the claimants’ allegations of infringement, or of the claimants’ request that SUNY release its rights to the 477 Patent. While the State's contention that it was not informed of the identity of the third-party infringers may have bearing on the issue of the State's liability for failing to protect the parties’ rights, it fails to support the contention that the State was unaware of the essential facts of the claim. Inasmuch as the State has not demonstrated that it will suffer undue prejudice in the event late claim relief is granted, these factors weigh in claimants’ favor.
With respect to the required showing of merit, the claim is sufficiently established if the claimants demonstrate that the proposed claim is not patently groundless, frivolous, or legally defective and there is reasonable cause to believe that a valid cause of action exists (Matter of Santana v. New York State Thruway Auth., 92 Misc. 2d 1, 399 N.Y.S.2d 395 [Ct. Cl., 1977]; Fowx v. State of New York, 12 Misc. 3d 1184(A), 824 N.Y.S.2d 762 [A] [ Ct. Cl., 2006]). The claimants have met that low threshold here.
“The essential elements of a breach of contract cause of action are the existence of a contract, the [claimant's] performance pursuant to the contract, the defendant's breach of his or her contractual obligations, and damages resulting from the breach” (Riccio v. Genworth Fin., 184 A.D.3d 590, 591, 124 N.Y.S.3d 370 [2d Dept. 2020] [internal quotation marks omitted]). Claimants bear the burden of demonstrating the existence of a contract reflecting the terms and conditions of their agreement (Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 181-182, 919 N.Y.S.2d 465, 944 N.E.2d 1104 ; LMEG Wireless v. Farro, 190 A.D.3d at 718, 140 N.Y.S.3d 593). “To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms” (Matter of Express Indus. & Term. Corp. v. New York State Dept. of Transp., 93 N.Y.2d 584, 589, 693 N.Y.S.2d 857, 715 N.E.2d 1050 , rearg denied 93 N.Y.2d 1042, 697 N.Y.S.2d 571, 719 N.E.2d 932 ). Administrative policies set forth in handbooks, brochures or other publications may have the force of a contract where they “form part of the essential employment understandings between a member of the Faculty and the University” (Matter of Monaco v. New York Univ., 145 A.D.3d 567, 568, 43 N.Y.S.3d 328 [1st Dept. 2016]; see also Matter of Shirazi v. New York Univ., 143 A.D.3d 602, 40 N.Y.S.3d 65 [1st Dept. 2016]; O'Neill v. New York Univ., 97 A.D.3d 199, 944 N.Y.S.2d 503 [1st Dept. 2012]; St. John's Univ., New York v. Bolton, 757 F. Supp. 2d 144 [E.D. N.Y. 2010]; Fenn v. Yale Univ., 283 F.Supp. 2d 615 [D. Ct. 2003]; Univ. of West Virginia Bd. of Trustees v. VanVoorhies, 278 F.3d 1288 [Fed. Cir. 2002]; Chou v. Univ. of Chicago, 254 F.3d 1347 [Fed. Cir. 2001]).8 In addition, “[t]he rights and obligations of the parties, as contained in the university's bulletins, bec[o]me a part of the parties’ contract” (Prusack v. State of New York, 117 A.D.2d 729, 730, 498 N.Y.S.2d 455 ) and are enforceable so long as they are sufficiently specific (Keefe v. New York Law School, 71 A.D.3d 569, 570, 897 N.Y.S.2d 94 [1st Dept. 2010] [“only specific promises set forth in a school's bulletins, circulars and handbooks, which are material to the student's relationship with the school, can establish the existence of an implied contract”]; Cheves v. Trustees of Columbia Univ., 89 A.D.3d 463, 464, 931 N.Y.S.2d 877 [1st Dept. 2011], lv denied 18 N.Y.3d 807, 2012 WL 489934  [“complaint fails to rely on a specific promise material to plaintiff's relationship with Columbia that has been breached”]; see also Downey v. Schneider, 23 A.D.3d 514, 516, 806 N.Y.S.2d 657 [2d Dept. 2005][“the terms of the contract are set forth, for the most part, in the institution's catalogue and other publications”]; Vought v. Teachers Coll., Columbia Univ., 127 A.D.2d 654, 655, 511 N.Y.S.2d 880 [2d Dept. 1987][“The rights and obligations of the parties as contained in the university's bulletins, circulars and regulations made available to the student, become a part of this contract”]). The specificity requirement is consistent with public policy against judicial interference in matters relating to the control and management of educational institutions (see generally Maas v. Cornell Univ., 94 N.Y.2d 87, 699 N.Y.S.2d 716, 721 N.E.2d 966 ; Matter of Susan M. v. New York Law School, 76 N.Y.2d 241, 557 N.Y.S.2d 297, 556 N.E.2d 1104 ; Hoffman v. Board of Educ. of City of NY, 49 N.Y.2d 121, 424 N.Y.S.2d 376, 400 N.E.2d 317 ). Here, SUNY's Patent Policy specifically provided that SUNY, “in consideration of the inventor's agreement that the invention shall belong to the university, will make provision entitling the inventor ․ to a nonassignable share in any proceeds from the management and licensing of such invention to the extent of 40 percent of the gross royalty paid” (Defendant's Exhibit A, Claim, Exhibit A attached thereto, former 8 NYCRR 335.28 [c]). Claimants allegedly acted in reliance on the Patent Policy when they assigned their rights in the 477 Patent to The Research Foundation and, based on various representations made by The Research Foundation on its website, it could reasonably be concluded that The Research Foundation was obligated to use its best efforts to market and commercialize the invention (see Perma Research & Development Co., v. Singer Co., 402 F. Supp. 881 [S.D. N.Y. 1995], affirmed 542 F.2d 111 [2d Cir. 1976], cert denied 429 U.S. 987, 97 S.Ct. 507, 50 L.Ed.2d 598 ). Accepting the allegations in the proposed claim as true, and giving the claimant the benefit of every favorable inference, the proposed claim states a potentially meritorious breach of contract cause of action.
Turning to claimants’ remaining cause of action, “[t]he elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant's misconduct” (WMC Realty Corp., v. City of Yonkers, 193 A.D.2d 1018, 148 N.Y.S.3d 161, 2021 N.Y. Slip Op. 02440 ; see also Rut v. Young Adult Inst., Inc., 74 A.D.3d 776, 777, 901 N.Y.S.2d 715 [2d Dept. 2010]). The law is settled that “[a] cause of action for breach of fiduciary duty which is merely duplicative of a breach of contract claim cannot stand” (William Kaufman Org. v. Graham & James, 269 A.D.2d 171, 173, 703 N.Y.S.2d 439 [1st Dept. 2000], citing Perl v. Smith Barney, Inc., 230 A.D.2d 664, 666, 646 N.Y.S.2d 678 [1st Dept. 1996], lv denied 89 N.Y.2d 803, 653 N.Y.S.2d 281, 675 N.E.2d 1234 ). However, “the same conduct which ․ constitute[s] the breach of a contractual obligation may also constitute the breach of a duty arising out of the relationship created by contract but which is independent of the contract itself” (Centerline/Fleet Hous. Partnership, L.P.—Series B v. Hopkins Ct. Apts., LLC, 176 A.D.3d 1596, 1597, 111 N.Y.S.3d 761 [4th Dept. 2019], quoting Mandelblatt v. Devon Stores, 132 A.D.2d 162, 167-168, 521 N.Y.S.2d 672 [1st Dept. 1987]; see also EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 799 N.Y.S.2d 170, 832 N.E.2d 26 ; Meyers v. Waverly Fabrics, Div. of Schumacher & Co., 65 N.Y.2d 75, 80 n. 2, 489 N.Y.S.2d 891, 479 N.E.2d 236 ; Bankers Conseco Life Ins. Co. v. Wilmington Trust, Nat'l Assoc., 195 A.D.3d 109, 147 N.Y.S.3d 17, 2021 N.Y. Slip Op. 02355 ; JT Queens Carwash, Inc. v. JDW & Assoc., Inc., 144 A.D.3d 750, 45 N.Y.S.3d 100 [2d Dept. 2016]). As explained by the Court in Saul v. Cahan, 153 A.D.3d 947, 949, 61 N.Y.S.3d 265 (2d Dept 2017):
“A fiduciary relationship arises when one is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation ․ It is grounded in a higher level of trust than normally present in the marketplace between those involved in arm's length business transactions ․ [A] conventional business relationship, without more, is insufficient to create a fiduciary relationship ․ Rather, a plaintiff must make a showing of special circumstances that could have transformed the parties’ business relationship to a fiduciary one, such as control by one party of the other for the good of the other ․ A fiduciary relationship may exist when one party reposes confidence in another and reasonably relies on the other's superior expertise or knowledge, but not in an arm's-length business transaction involving sophisticated business people” (internal quotations omitted).
The claimants’ here allege that the State's Patent Policy established a relationship of trust and confidence by requiring the assignment of inventions in return for assuming the responsibility to manage and license the inventions for the mutual benefit of the parties. Such allegations state a breach of duty arising from the contractual relationship of the parties but which, given the relationship of trust, may be determined to arise independently of the contract. At this early stage in the case, it appears the breach of fiduciary duty cause of action is not patently lacking in merit.
Finally, while it does not appear the claimants have alternative recourse against the State, there is an action pending against The Research Foundation in the Supreme Court. This factor weighs against the claimants.
Based on the foregoing, the Court finds that the weight of the statutory factors favors granting the claimants’ application for leave to serve and file a late claim. Claimants are directed to file and serve their claim in accordance with Court of Claims Act § 11 and § 11-a within forty-five days of the date this Decision and Order is filed.
2. Claimants allege in the claim that Dr. Arkles is the third inventor of the invention and his work with the claimants took place under a cooperative agreement between the Research Foundation (a non-profit educational corporation organized for the purposes of administering sponsored programs for research, training and related activities) and Gelest Inc. Claimants allege further that Dr. Arkles assigned his rights to the invention to Gelest, which co-owns the intellectual property rights together with the Research Foundation (defendant's Exhibit A, Claim, n 1).
3. The Research Foundation is SUNY's “administrative agent for its sponsored programs and technology transfer activity” (defendant's Exhibit A, Claim, Exhibit C annexed thereto, the Research Foundation's Intellectual Property Policy, p. 1, ¶ 1).
4. The Patent Policy, codified in 8 NYCRR 335.28, was amended in November, 2016. The Research Foundation's Intellectual Property Policy acknowledges this amendment, and states specifically that technology disclosures received by SUNY prior to the effective date of the amendment must adhere to SUNY's prior Patent Policy and its royalty distribution model (id. at Exhibit C). In addition, in the 1977 agreement between SUNY and The Research Foundation, The Research Foundation specifically agreed that SUNY's Patent Policy governed all patent and copyright matters and in the event SUNY's Patent Policy was “modified in the future, the [Research] Foundation shall modify its own patent and copyright policy promptly to conform therewith” (defendant's Exhibit A, Claim, Exhibit B attached thereto, p. 12, ¶ 14).
5. The Court is treating the filed claim as the proposed claim in this matter.
6. Defendant's contention that claimant failed to exhaust administrative remedies is belied by the plain words of the Patent Policy then in effect which provided only that an inventor “may” request the Patents and Invention Policy Board (the “Board”) to recommend release of a patent “[i]n every instance in which the university determines not to file a patent application or continue efforts at marketing” (defendant's Exhibit A, Claim, Exhibit A annexed thereto, 8 NYCRR 335.28 [f]). Thus, the right to request release from the Board appears optional, not mandatory, as defendant contends. Moreover, the new Patent Policy, amended in November, 2016, contains no such similar option for an inventor to direct a request for release to the Board. Whether or not the Board would have entertained such a request from the claimants in 2018 when they initially prevailed upon SUNY to do so is unknown.
7. Claimants’ counsel asserts that after settlement negotiations proved futile, they amended their claim in the Supreme Court case to remove SUNY as a defendant and initiated a separate claim against the State in the Court of Claims (see affirmation of Michael C. Miller dated March 1, 2021, ¶ 9).
8. It is unclear whether compliance with the Patent Policy was a condition of claimants’ employment.
Francis T. Collins, J.
Response sent, thank you
A free source of state and federal court opinions, state laws, and the United States Code. For more information about the legal concepts addressed by these cases and statutes visit FindLaw's Learn About the Law.
Docket No: 135708
Decided: May 18, 2021
Court: Court of Claims of New York.
Search our directory by legal issue
Enter information in one or both fields (Required)
FindLaw for Legal Professionals
Search our directory by legal issue
Enter information in one or both fields (Required)