The Supreme Court confirmed that inventors own the inventions they conceive, unless assigned, even when the inventor was working under a grant from the U.S. Government. Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., No. 09-1159, 2011 WL 2175210 (Sup. Ct. June 6, 2011)

In a case involving the Bayh-Dole act, 35 U.S.C. §§ 200-212, the Supreme Court ruled that Stanford was not the sole owner of the patent it asserted against Roche, and therefore Roche was not an infringer, but an actual owner. The key facts were: (1) the Stanford inventor worked on the invention while on detail at the Cetus PCR (polymerase chain reaction) facility; (2) in return for access to its technology, Cetus required the inventor to assign his rights to whatever resulted from his studies at Cetus; and (3) Roche subsequently acquired Cetus. Stanford and the U.S. Government argued jointly that the Bayh-Dole act automatically vested ownership of the invention in Stanford. The Supreme Court dispelled such notions by reconfirming 200 years of patent law that requires an assignment from the inventor to vest ownership in the employer. The only Stanford document prior in time to the Cetus agreement was a promise to assign by the inventor.

When Stanford hired Dr. Holodniy as a fellow in its Department of Infectious Diseases, he "'agreed to assign' to Stanford his 'right, title, and interest in' inventions resulting from his employment at the University." His supervisor arranged for him to work at Cetus to learn about PCR, where he was required to and signed an agreement in which "he will and does assign his rights, title, and interest," in whatever resulted from his work while at Cetus. While there, he developed a PCR-based procedure for measuring HIV in a patient's blood. Following his return, Stanford secured three patents on the measurement process. Roche later acquired Cetus's PCR-related assets, conducted clinical trials on the method developed at Cetus, commercialized the procedure and distributed the test kits worldwide. Stanford sued Roche for patent infringement. Roche asserted the defense that it was an owner. The District Court held for Stanford agreeing that Holodniy had no rights to assign to Cetus. The Federal Circuit disagreed holding that Holodniy assigned his rights to Cetus and that the Bayh-Dole act did not automatically void Holodniy's rights in federally funded inventions. The Supreme Court affirmed the Federal Circuit and construed key provisions of the Bayh-Dole act.

Stanford asserted that 35 U.S.C. § 201(E) language "invention of the contractor" means, "all inventions made by the contractor's employees with the aid of federal funding." The interpretation was soundly rejected applying technical rules of statutory construction. Other language in the act was also similarly construed. Before the Court delved into its technical construction, it began with this harbinger: "That reading assumes that Congress subtly set aside two centuries of patent law in a statutory definition." The Court ended the discussion by focusing on the fact that Stanford had failed to get the assignment language right:

As just noted, universities typically enter into agreements with their employees requiring the assignment to the university of rights in inventions. With an effective assignment, those inventions—if federally funded—become "subject inventions" under the Act, and the statute as a practical matter works pretty much the way Stanford says it should. The only significant difference is that it does so without violence to the basic principle of patent law that inventors own their inventions.

Justice Sotomayor concurred in the Court's opinion and wrote about her concerns regarding principles adopted by the Federal Circuit in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1572 (1991), which involved construing licensing agreements entered into before an invention was conceived, an issue that Justice Sotomayor and the dissenters, Justices Breyer and Ginsburg, would like to review whenever it is briefed.

The dissent argued that a decision was premature about who has ownership of a patent when federal funding is involved. The dissent agreed that the inventor owns his or her own invention, but was concerned that this ruling may impede on the "commercialization" of the product. Justice Breyer voiced the concern that "the people" have submitted funds towards the invention and that there are problems with the idea that an individual may transfer his or her rights to the federally funded invention to a third party.

In the wake of this decision, universities must now be especially careful in drafting agreements with research employees. Had Stanford's employment agreement used explicit assignment language, such as "does hereby assign all of his rights, title, and interest in...," the outcome might have been different and Stanford would probably have increased its royalty income.