Does Title to Federally Funded Inventions Rest With the Inventor or Automatically Vest to the Funded Organization?

In a closely watched case, the Supreme Court held on June 6, 2011 that the Bayh-Dole Act, which gives federally funded organizations the option to retain title in federally funded inventions, does not automatically vest title to an organization employing an inventor. Therefore, an assignment from the inventor to the federally funded organization is essential for the transfer of assets, including patent rights to the invention.

The Stanford-Roche controversy ultimately stemmed from competing assignment provisions in two separate agreements. A professor employed by Stanford University signed an “Employment Agreement” containing an assignment clause in which the professor “agree[d] to assign” all inventions resulting from his employment to Stanford. The professor subsequently received federal funding to conduct research on the efficacy of a new AIDS drug and began collaborating with an outside company, Cetus. During the collaboration, the professor also signed Cetus’s “Confidentiality Agreement,” including a second assignment clause stating that the professor “do[es] hereby assign” all inventions resulting from the professor’s access to Cetus to Cetus.

Stanford successfully prosecuted patent applications covering the professor’s inventions, and Cetus successfully developed a procedure to test the efficacy of the AIDS drug based on the inventions. Roche subsequently acquired Cetus’s assets and commercialized an HIV test kit based on the procedure.

Stanford sued Roche for infringement of Stanford’s patents. Roche argued that it held title to the inventions as a result of the assignment clause in its Confidentiality Agreement. Stanford countered that any assignments executed by the inventor were inoperative because the Bayh-Dole Act automatically allocated all rights in the inventions to Stanford.

The Supreme Court held that the Bayh-Dole Act did not automatically vest title in the inventions to Stanford, thereby reaffirming “two centuries of patent law” declaring that inventors are the initial title bearers of their inventions. The Supreme Court did not address the state law issue of whether a prior promise to assign (“agree to assign”) is superior to a later instant assignment (“hereby assigns”). The case, however, highlights the important role of a well-crafted contract in solidifying a chain of title.

It has long been a best practice to require a present assignment of all future inventions from every potential inventor. Using present assignment language avoids any ambiguity and renders moot the lingering questions from the Stanford controversy. This language is often written into employment, consulting and service agreements with employees, contractors and visitors. When possible, federally funded organizations would be well-served to require the same present assignment of their own inventors.

If, like Stanford, a federally funded organization cannot get a broad, present assignment of future inventions, that organization must work hard to police the activities of its federally funded employees and researchers. This may mean more intervention in the day-to-day activities of its federally funded employees and researchers. For instance, the organization may consider:

  • requiring a present assignment whenever the research applies for or accepts federal funding (the assignment is on a case-by-case basis);
  • requiring federally funded employees and researchers to submit all contracts with outside institutions for legal review concerning ownership of federally funded inventions; or
  • requiring any third party institution hiring, contracting with, or otherwise engaging a federally funded researcher to continue his or her federally funded research to enter into an agreement that addresses ownership between the parties.

In the same light, non-federally funded organizations hiring or working with federally funded institutions or researchers should determine the legal obligations of their inventor collaborators prior to having the collaborator execute an assignment in the event that the inventor’s employer already has a legal interest in the invention.