In Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., the Supreme Court upheld the basic principle of U.S. patent law that rights to an invention vest initially in the inventor(s), and affirmed the Federal Circuit's determination that the Bayh-Dole Act does not upset the rule of inventor ownership.
The Patents At Issue
The patents at issue (U.S. 5,968,730, U.S. 6,503,705, and U.S. 7,129,041) relate to polymerase chain reaction (PCR) assays for monitoring the effectiveness of antiviral therapy in the treatment of AIDS.
The Agreements At Issue
One of the named inventors, Mark Holodniy, was a Research Fellow at Stanford, but did some work at Cetus (as a Stanford employee) to learn PCR techniques. For his position at Stanford, Holodiny executed a "Copyright and Patent Agreement" where he "agree[d] to assign" all inventions resulting from his employment. In order to work at Cetus, he executed a "Visitor’s Confidentiality Agreement," which stated that he "will assign and do[es] hereby assign" inventions made "as a consequence of [the] access" he was granted at Cetus. Holodiny's work eventually resulted in the patents at issue, which were assigned to Stanford.
Stanford's HIV research was supported by an NIH grant, which brings the inventions at issue under the Bayh-Dole Act (35 USC 200-212).
The Ownership Dispute
Before the patents were granted, Roche obtained rights to Cetus "PCR business," including the agreements with Stanford and its researchers. Roche began marketing HIV detection kits, which Stanford alleged infringed the patents. Roche asserted that it could not be sued for infringement because it had rights to the patents. Although the district court disagreed, the Federal Circuit reversed, based on its interpretation of the agreements and the Bayh-Dole Act. The Supreme Court considered and upheld the decision on the Bayh-Dole Act issue only.
The Transfer of Ownership
In accordance with basic principles of U.S. patent law, an invention initially vest in the inventor(s), absent an agreement to the contrary. Under Federal Circuit case law, a contract with "agree to assign" language reflects "a mere promise to assign rights in the future, not an immediate transfer of expectant interests." On the other hand, a contract with "do hereby assign" language does effect "a present assignment of . . . future inventions." Thus, the agreements at issue here resulted in the following transfer of ownership:
Execution of Stanford Copyright and Patent Agreement: no effect
Execution of Cetus Visitor’s Confidentiality Agreement: transferred future rights to Cetus
Invention by Holodniy and others: rights vested in inventors, Holodniy rights immediately transferred to Cetus
Roche purchase of Cetus PCR business: transferred Cetus rights to Roche
Holodniy assignment of patent rights to Stanford: no effect because his rights already were transferred to Cetus
The Bayh-Dole Act
Stanford argued that because the patents resulted from research supported by an NIH grant, the Bayh-Dole Act prevented Holodniy from being able to transfer his rights to Cetus.
As summarized by the Supreme Court, the Bayh-Dole Act (35 USC 200-212) was enacted in 1980 in order to "promote the utilization of inventions arising from federally supported research," "promote collaboration between commercial concerns and nonprofit organizations," and "ensure that the Government obtains sufficient rights in federally supported inventions." The Bayh-Dole Act permits a grant recipient to "retain title to any subject invention" as long as certain conditions are met. When the grant recipient elects to retain rights, the granting Federal agency has a "a nonexclusive, nontransferrable, irrevocable, paid-up license to practice . . . [the] invention." If the grant recipient does not elect to retain title to the invention, the agency can entertain requests from the inventor to retain rights to the invention.
Stanford argued that specific language used in the Bayh-Dole Act (such as the "retain" language highlighted above) indicates that the grant recipient, and not the inventor, is the primary owner of inventions supported by government funding. The Supreme Court disagreed, finding the language to be too indirect, particularly when viewed in contrast with other statutes that expressly provide for government ownership of certain federally supported inventions (such as certain nuclear inventions, certain aeronautics/space inventions, and certain energy inventions). Because the Bayh-Dole Act does not include such express language, the Supreme Court determined that it did not upset “the fundamental precepts of patent law and deprive inventors of rights in their own inventions.”
"The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have."
Safeguarding Ownership Of Inventions
This Supreme Court decision largely maintains the status quo regarding the ownership of inventions, but this case as a whole serves as a reminder of the importance of seemingly routine employment and collaboration agreements, and the IP risks associated with multi-entity collaborations. Employers should keep careful track of the agreements their employees execute with other entities, and should closely review any terms relating to IP ownership. As this case demonstrates, an inventor may have the ability to transfer IP rights to another entity without the consent or authority of his employer.