FOCUS: High-Stakes Retin-A suit pits U. against Johnson & Johnson, emeritus prof.

It seemed as if the never-ending quest for a fountain of youth had finally found its treasure -- in a tube of Retin-A acne cream. Word spread slowly from medical circles in the mid-1980s that the drug could smooth away those wrinkles that years of sun damage had engrained on millions of faces. Spurred by votes of confidence from doctors across the country, all the major television networks and a host of large-circulation magazines touted Retin-A as a so-called "miracle drug" by late 1988. Every piece of press coverage hailed Albert Kligman -- the famous University dermatologist who invented the acne drug in 1967 -- as a savior for a growing number of people who were reluctant to let their fleeting youth pass without a fight. And in the mad rush that accompanied all the hype, the drug's maker, Ortho Pharmaceutical Corporation -- a subsidiary of $9 billion Johnson & Johnson -- experienced skyrocketing sales of Retin-A: from approximately $13 million in 1985 to more than $100 million in 1989. It was a pharmaceutical company's dream come true -- or so it seemed. The drug is still regarded as an effective means to counter wrinkles from sun damage, although many doctors say they only recently have been able to convince the general public that it is, in fact, anything but a fountain of youth. Ortho's Retin-A sales have remained steadily in the range of $100 million a year, according to David Saks, a senior investment analyst at Wedbush Morgan Securities in New York. But the question of who owns the rights to the patent covering Retin-A's potentially lucrative anti-wrinkle uses has emerged as the crux of a nasty lawsuit involving J & J and Kligman on one side and the University on the other. Depending on the outcome of the two-year-old case, which may reach the trial stage this semester barring an out-of-court settlement, Ortho -- and therefore J & J -- could find itself rudely awakened from its dream of Retin-A riches. The University, along with its former licensing agent, University Patents, Inc., is suing both J & J and Kligman in U.S. District Court. Both parties claim the University owns licensing rights to the anti-wrinkle patent and therefore should be entitled to past and future royalties on sales of the anti-wrinkle invention. And the lawsuit contends the University has discovered in recent years that Kligman's dealings with the University have been clouded in deception and dishonesty from the first patenting of the drug in the late 1960s. · Since 1967, the University has had a licensing agreement with J & J that covers only sales of Retin-A as an anti-acne treatment. In the suit, the University is demanding all profits J & J has made on the anti-wrinkle invention to date, as well as the rights to license the invention in the future to a third party of its choice. It is not at all clear exactly how much money the University could stand to gain from winning the suit. Lawyers from both sides have refused to discuss such details of the case. But by all accounts, a verdict against J & J could mean millions and millions of dollars for the University now and in the future, something the University clearly could use in these times of growing financial uncertainty. The University claims that Kligman knowingly violated the University's patent policy when he filed a patent for the anti-wrinkle invention in his own name in 1981. The suit also contends that he then broke the conflict-of-interest guidelines when he sold J & J the exclusive rights to the patent in 1984 and that he consistently misled the University about the commercial prospects for the invention. Pointing to a large follow-up study for the invention conducted in the aging skin clinic at the Hospital of the University of Pennsylvania, University lawyers claim Kligman at least partially developed the invention on University time and at University expense. According to the patent policy, " . . . [A]ny invention or discovery which may result from work carried out on University time or at University expense by special grants or otherwise is the property of the University." Moreover, the University argues that J & J knew Kligman was breaking the rules but helped him nevertheless to develop the invention and continue his active deception of University officials. Attorneys for J & J and Kligman, who is now an emeritus professor in the Dermatology Department, firmly deny the University's allegations. They note that Kligman never signed a patent policy -- Kligman said in a deposition that he never recalled even receiving a copy of such a policy -- and argue that adherence to the policy was never a condition of his employment. Beyond that, they say the University's patent policy does not apply in the case of the anti-wrinkle invention because most of the research and development performed prior to the patent was not done on University time and did not involve University funding. · For the past two years, lawyers from both sides have been busy filing various motions, claims and responses in the hope that blind justice will have no trouble seeing their side of the story come decision time. Over the past two years, the lawsuit's file, which is stored at the federal courthouse in Center City, has ballooned to thousands of pages of documents and comes in three thick folders, each about the size of a cinder block. Many of the documents deal with whether Kligman violated the patent policy, failed to adhere to the conflict-of-interest guidelines and whether or not those two policies applied to Kligman during the time in question. But the documents address another key issue: if Kligman did break any rules, did he do so intentionally? Or is he an innocent pawn who thought he was doing the right thing only to find himself trapped in this high-stakes wrangling? Perusing those documents, either of those answers soon becomes readily apparent -- depending on which side's documents one reads. A look at the defense shows Kligman to be a generous man who brought international fame and recognition to the Dermatology Department. The documents point out that he voluntarily channeled his personal Retin-A royalties to the University for many years to supplement his fund-raising work for the department. His attorneys argue that when he filed his patent on the use of Retin-A as a wrinkle cream on his own and then negotiated directly with J & J on the licensing agreement, he was merely following the practice of the time. The defendants' unsuccessful February, 1990 motion to dismiss the suit says that "like many of his colleagues during the 1950s, 1960s and 1970s, Kligman received only a nominal salary and was expected to earn a living through outside activities." The motion says Kligman did just that by consulting for drug and cosmetic companies, conducting much of his research through Ivy Laboratories and the Simon Greenberg Foundation, two independent organizations which Kligman "founded and funded." So, when he discovered Retin-A's effectiveness at smoothing wrinkles during independent research at the Riverview Home for the Aged in 1971, the court papers say, Kligman felt it was acceptable to begin developing the invention with J & J, without notifying the University. Further, the defense rejects the University's claim that Kligman and J & J attempted to conceal the anti-wrinkle invention. They cite the considerable exposure the invention received in the press beginning in the early 1980s, the public nature of the patent application and the University's own knowledge that the anti-wrinkle invention existed. "A less well-concealed invention can scarcely be imagined," the motion concludes. The University's court papers praise Kligman's brilliance in dermatological research and scholarship. Yet they raise doubts about his highly-praised generosity with royalties as well as his honesty in disclosing inventions to the University. They allege, for example, that Kligman and J & J broke a 1967 agreement with the University that allowed the company to market Retin-A as an acne treatment as long as the University received all royalties. Although Kligman agreed he would not receive money personally from sales, the University learned he was in fact receiving royalties when a misdirected $6000 check from J & J to Kligman was delivered to the office of a University administrator in 1976, the documents argue. Kligman denied the money was a royalty, but Anthony Merritt, currently the director of the Office of Research Administration at the University, said in an affidavit last February he had learned Kligman had received over $190,000 for Retin-A in so-called "consulting payments" from J & J. "Dr. Kligman's selflessness -- with which he persuaded the University to give up its right to control the royalties to which it was entitled -- was somewhat overstated," the University's court papers say. To be fair, University lawyers admit Kligman informed them in several cases that he had discovered Retin-A's use as an effective wrinkle cream. But they emphasize that he never suggested the discovery would be a patentable invention, leaving the University to believe it would receive benefits in the form of higher royalties covered by the 1967 agreement. Moreover, the University argues that by the time Kligman formally disclosed the discovery to University administrators in late 1985, Kligman had already entered into the secret 1984 agreement with J & J and was close to receiving assurances from the patent examiner that his patent for the discovery would be approved by the government in 1986. The University also points to a letter Kligman wrote in 1971 to James Bodine, then J & J's marketing director, which shows "that Dr. Kligman from the start appreciated the commercial potential of the new invention" and therefore should have informed the University. The letter reads in part: "Jim, something noteworthy and sensational is coming about . . . I have plans for a crash attack on the rejuvenation of the fading broads of the world. I am damned serious. We are sitting on a golden egg!"

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