Between 1988 and 1989, Mark Holodniy, an AIDS scientist at Stanford University, signed a couple of agreements, first a Copyright & Patent Agreement (CPA) with Stanford under which he “agreed to assign” to Stanford his intellectual property, and then a Visitor’s Confidentiality Agreement (VSA) with Cetus (a company later purchased by the pharmaceutical company Roche) stating “I will assign and do hereby assign to Cetus” his inventions.

Holodniy’s research with Cetus produced an essay to measure plasma HIV in human samples.  Holodniy and his supervisor later discovered that the essay was suitable as a test for evaluating the effectiveness of HIV drug therapies.  Stanford then proceeded to file a patent application for the essay naming Holodniy and others as inventors.  Since the funding for Holodniy’s research was provided by the federal National Institute of Health, the U.S. Bayh-Dole Act applied.  The Bayh-Dole Act allows for the transfer of exclusive control over government funded inventions to universities and businesses operating with federal contracts.

Miller Thomson Analysis

In October of 2005, after unsuccessful licensing negotiations, Stanford sued Roche for patent infringement.  The Court of Appeal for the Federal Circuit in Washington ruled that Roche was a co-owner of the patents by virtue of Holodniy’s assignment to Cetus.  According to the Court of Appeal, the term “agree to assign” found in the CPA implies a mere promise to assign rights in the future, and not an immediate transfer of expectant interests.  In contrast, the “do hereby assign” language of the VSA was interpreted as “shall belong” and as a present assignment.  Based on the language used in the CPA and VSA, the Court of Appeal held that legal title to Holodniy’s rights in the patents vested first in Cetus (now Roche), while Stanford kept the rights of the other remaining inventors.  As a co-owner, Roche could not be sued and it was entitled to use the invention covered by the patents.

Regarding the Bayh-Dole Act, the Court of Appeal held “We see no reason why the Act voids prior contractual transfers of rights.”

In June 6, 2011, the Supreme Court of the United States held that the Court of Appeal correctly split ownership of the patents at issue between Stanford University and Roche, and that the Bayh-Dole Act does not expressly deprive inventors of their interest in federally funded inventions.

The case raises several important issues regarding the scope of the Bayh-Dole Act and how it will affect intellectual property ownership.  From a practical point of view, however, the case shows the importance of using the correct language in the transfer of title of inventions which would allow for an immediate and present transfer of title.