In a 7-2 decision, the Supreme Court affirmed the longstanding rule that patent rights to inventions belong to the “inventor.” The decision confirms that a federally funded contractor does not necessarily own the patent rights to inventions resulting from funded projects or authorize contractors to unilaterally take title to such inventions.

The Board of Trustees of the Leland Stanford Junior University (supported as well by the United States Government, MIT, WARF, the Association of American Universities, and others) unsuccessfully argued before the Supreme Court that such rights automatically vest under the Bayh-Dole Act of 1980. The three patents in this case involve methods for using PCR techniques to measure HIV concentration in blood plasma to determine the effectiveness of AIDS treatment. Stanford scientists invented the methods while subject to a contractual duty to assign any inventions to Stanford. After agreeing to assign rights, but prior to making the invention, one of the inventors, Dr. Mark Holodniy, who was working on a collaboration between the University and Cetus, assigned his rights in his future inventions to Cetus, whose PCR business was later acquired by Roche. Dr. Holodniy promised to assign rights to Stanford but had actually assigned his rights to Cetus. Stanford filed for a patent and then demanded a royalty from Roche for the sale of its HIV test. The Federal Circuit has held that Roche could not be liable for infringement because it held ownership rights based on Holodniy’s purported assignment even though it was contrary to his promise to Stanford.

The majority, led by Chief Justice Roberts, affirmed stating that US patent rights have for some time (since 1790) vested in “the inventor” and that the Bayh-Dole Act does nothing to change this framework. Stanford and supporting amicus contended that, when an invention is conceived or first reduced to practice with the support of federal funds, the Bayh-Dole Act vests title to those inventions in the inventor’s employer—the federal contractor. Stanford’s construction would permit title to an employee’s inventions to vest automatically in the University. Yet, the Supreme Court reasoned that Congress has, in the past, divested inventors of their rights in inventions only by providing, unambiguously, that inventions created pursuant to certain specified federal contracts become the Government’s property. Such unambiguous language is notably absent from the Bayh-Dole Act which, instead, provides that contractors may “elect to retain title to any subject invention,” §202(a).

The Supreme Court reasoned that its construction of the Act was reflected in the common practice of contractors, who generally obtain assignments from their employees, and of agencies that fund federal contractors, who typically expect those contractors to obtain assignments. With effective assignments, the Supreme Court believed that federally funded inventions become “subject inventions” and the Act as a practical matter works pretty much the way Stanford argued it should without altering the basic patent law principle that inventors own their inventions.

The ruling is a reminder to federal contractors to craft assignment contracts carefully to actively secure patent rights in the first place or risk losing ownership in the inventions their employees discover.