By Donna Gonzales-Lin
On June 6, 2011, the United States Supreme Court issued its decision in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., affirming the Federal Circuit and holding that the “Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions.”
The invention at issue is a Nobel Prize winning technique for quantifying blood-borne levels of HIV, called polymerase chain reaction, or PCR, invented by Cetus. Cetus collaborated with Stanford University’s Department of Infectious Diseases to test the efficacy of new AIDS drugs. Around that time, Dr. Mark Holodniy joined Stanford, and upon doing so, signed an agreement stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment at the University.
As part of the collaboration between Stanford and Cetus, Dr. Holodniy was permitted to gain access to Cetus. The access was conditioned upon Dr. Holodniy signing an agreement, stating that he “will assign and do[es] hereby assign” to Cetus his “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus. For months he conducted research at Cetus with the assistance of Cetus employees. After successfully devising a new HIV measurement procedure (“Procedure”), he returned to Stanford where he tested said Procedure. Thereafter, Stanford obtained assignments from everyone involved in the development of the Procedure, including Holodniy, and subsequently secured three patents covering the Procedure.
Stanford disclosed the Procedure to and formally notified the National Institutes of Health (“NIH”) that it elected to retain title to the invention in accordance with the Bayh-Dole Act. The Act allocates rights in federally funded “subject invention[s]” between the federal government and federal contractors. The Act also provides that contractors may “elect to retain title to any subject invention.” Since some of Stanford’s research related to the Procedure was funded by the NIH, the Act applied.
At some point after Dr. Holodniy began conducting research at Cetus, Roche Molecular Systems acquired Cetus’s PCR-related assets, including all rights assigned by Dr. Holodniy when he signed the access agreement. After conducting clinical trials on the Procedure developed at Cetus, Roche commercialized the Procedure in the form of test kits.
Stanford sued Roche, alleging that Roche’s test kits infringed Stanford’s patents. Roche responded that it was a co-owner of the invention because Dr. Holodniy assigned his rights to Cetus upon signing the access agreement. Therefore, Roche argued, Stanford had no standing to sue. Stanford replied that Dr. Holodniy had nothing to assign because under the Act, Stanford had superior rights to the invention.
The District Court agreed with Stanford, holding that Dr. Holodniy had no rights to assign based on the Bayh-Dole Act because the Act provides that the individual inventor may obtain title to federally funded invention “only after the government and the contracting party have declined to do so.” The Federal Circuit reversed, finding that Dr. Holodniy in fact assigned his rights to Cetus, and thus to Roche. If further held that the Act “does not automatically void ab initio the inventors’ rights in the government-funded inventions” and that the “statutory scheme did not automatically void the patent rights that Cetus received from Dr. Holodniy.
The Supreme Court affirmed, holding that the Act does not automatically vest title to federally funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions.
The Court started with the general rule that rights in an invention belong to the inventor, and that an inventor can assign his rights in an invention to a third party. Unless there is an agreement to the contrary, the employer does not have rights in an invention that is alone the employee’s original conception. The Court found that Stanford’s assertion—that the Act reverses the priority of right in the invention, where the property right is automatically vested in the employer instead of the inventor-employee—is contrary to the patent tenets. The Court also recognized that the Act, unlike other statutes, has no provisions allowing for such automatic vestment of rights to the employer.
The Court then focused on the Act’s definition of “subject invention,” which is defined as “any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.” Stanford argued that the phrase “invention of the contractor” “is naturally read to include all inventions made by the contractor’s employees with the aid of federal funding.” The Court disagreed and found that such construction is contrary to basic patent law, and rendered the phrase “of the contractor” superfluous. The Court instead construed the phrase as referring to a “particular category of inventions conceived or reduced to practice under a funding agreement.” Based on this construction, an “inventor’s contractor” does not automatically include inventions made by the contractor’s employees. Only when the invention belongs to the contractor does the Act apply, and when its provision regarding the disposition of rights come into play.
In this case, since Dr. Holidniy was not divested of his rights by the Act, he retained those rights. Upon signing the access agreement with Cetus, he assigned those rights to Cetus, and, consequently, to Roche. Therefore, Roche was a co-owner of the invention, and thus, Stanford had no standing to sue.
The Supreme Court opinion may be found here. Follow this link (http://news.stanford.edu/pr/2011/pr-supreme-court-roche-060611.html) for Stanford University’s Statement regarding the Supreme Court decision.
Donna is a fourth-year evening student at the University of Denver Sturm College of Law. She is a member of the Colorado IP American Inn of Court and the Executive Editor of the Transportation Law Journal. She is currently in Washington, D.C. clerking for the IP branch of the Air Force Commercial Law and Litigation Directorate.