Hot on the heels of an Australian decision in September,[i] an October 1 decision of the US Court of Appeals for the Federal Circuit (Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc.[ii]) gives further reason for universities to be vigilant in ensuring that the rights they hope to hold in inventions made by their academic staff are properly assigned.
Mark Holodniy joined a research team at Stanford University in 1988. At that time, he signed a Copyright and Patent Agreement ("CPA") which provided that he: "agree[d] to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in" various inventions that he might conceive in his work as required by Contracts or Grants.
Shortly thereafter, in 1989, Holodniy began working regularly with a company called Cetus, whose assets of relevance to the case were later purchased by Roche. In the context of this work, Holodniy signed a Visitor's Confidentiality Agreement ("VCA") with Cetus which provided that Holodniy "will assign and do[es] hereby assign to CETUS, my right, title and interest in each of the ideas, inventions and improvements" that Holodniy might devise as a consequence of his work at Cetus.
Eventually, Holodniy's work contributed to an invention. At that time, and for many years thereafter, the parties acted as if the rights in the invention were owned by Stanford. Cetus/Roche entered into negotiations with Stanford to obtain a licence to use the invention and, in 1992, Stanford filed a patent application that became the parent of the patents in suit. Holodniy executed an assignment of his rights in the parent application in 1995.
In the end, the licence negotiations were not successful and Stanford sued Roche for patent infringement. Roche argued that Stanford had no standing to sue because Roche was the owner of the rights. Roche also sought a declaration that it was the owner of the rights.
Stanford argued that the applicable statutes of limitations prevented any finding in Roche's favour with regard to its claim of ownership of the rights. The Court agreed that Roche was not entitled to a declaration of ownership of the rights. However, the Court ruled that Roche was entitled to assert ownership of the rights as part of its defence to Stanford's patent infringement allegations.
With regard to the conflicting claims of ownership of the rights, the Court sided with Roche. The Court interpreted the words "agree to assign" in the CPA between Stanford and Holodniy as reflecting "a mere promise to assign rights in the future, not an immediate transfer of expectant interests." The Court stated that "agree to assign" is "an agreement to assign, requiring a subsequent written instrument".
Turning its attention to the VCA between Cetus and Holodniy, the Court interpreted the words "do hereby assign" as effecting "a present assignment of Holodniy's future inventions to Cetus." The Court ruled that this provision gave Cetus equitable rights in Holodniy's inventions, which equitable rights converted to legal title once Holodniy conceived his contribution to the invention in issue.
Stanford also argued that, despite all this, effect should be given to the 1995 assignment from Holodniy to Stanford pursuant to section 261 of the US patent law. This section provides:
An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.
Stanford argued that (i) the 1995 assignment of rights was for valuable consideration; (ii) it was without notice of the rights granted to Cetus/Roche in the VCA; and (iii) Cetus/Roche had never recorded its assignment. The Court dismissed Stanford's argument noting that Holodniy was an employee of Stanford who knew of the assignment of rights to Cetus/Roche in the VCA, and that therefore "Stanford had at least constructive or inquiry notice of the VCA." Therefore, Stanford could not have been a subsequent purchaser "without notice".
As a result, Stanford lost its case because Roche's defence against the patent infringement allegations based on its ownership interest was successful.
Would a Canadian court, faced with the same facts, reach a similar conclusion? It may help to begin with section 51 of Canada's Patent Act, which is similar, but not identical, to the above-quoted provision of the US patent law: "Every assignment affecting a patent for invention . is void against any subsequent assignee, unless the assignment is registered as prescribed . before the registration of the instrument under which the subsequent assignee claims."
Canada's provision is notable for the absence of requirements of "valuable consideration" and "without notice". One might be inclined to argue that these requirements should be considered implicit, and a 1927 decision of the Alberta Court of Appeal, Colpitts v. Sherwood,  2 D.L.R. 670, would support such an argument. However, a 2001 decision of the Quebec Court of Appeal, Poinçons de Waterloo Inc. v. 3288731 Canada Inc.,  J.Q. No. 804, took the opposite view. In that case, a subsequent purchaser of a patent was not required to respect the rights of a previous acquirer of rights because the previous acquirer had not registered its rights. The Court maintained this view even in the face of evidence that the subsequent purchaser had knowledge of the previous acquirer's rights at the time of purchase. The Court ruled the previous assignment of rights was simply null and void against the subsequent purchaser, focusing on section 50(2) of the Patent Act, which makes registration of exclusive rights in a patent obligatory:
Every assignment of a patent, and every grant and conveyance of any exclusive right to make and use and to grant to others the right to make and use the invention patented, within and throughout Canada or any part thereof, shall be registered in the Patent Office in the manner determined by the Commissioner. (emphasis added)
Based on the apparent conflict between the Colpitts and Poinçons de Waterloo decisions (the latter did not refer to the former), the current state of the law in Canada is unclear. Has the law changed? It would not seem so since the relevant statutory provision remains substantially unchanged. Is Quebec law different from that of Alberta or the rest of Canada? That would be surprising since both decisions concern the same statute.
At the end of the day, what can be done to ensure a university's rights in inventions made by its academic staff? One good piece of advice is to promptly register assignments and grants of exclusive rights in patents as required by section 50(2) of the Patent Act. However, even prompt registration would not have helped Stanford in this case. Stanford was diligent in ensuring that it obtained an agreement to assign. Should it have phrased its CPA in the form of a present assignment, e.g., "hereby assign"? In many cases, that may not be what is wanted. Often, a university does not want an automatic assignment of rights and relies instead on a process for disclosure of inventions to a committee which assesses them and determines the university's interest. Another challenge for universities is keeping track of the other agreements that their academic staff may enter into in the course of their various collaborations with outside entities. There seems to be no easy answer.