Stanford University v. Roche, 563 U.S. ___ (2011).
In a case alleging infringement of patents for a method of HIV testing, the Supreme Court held that the University and Small Business Patent Procedures Act of 1980 (the Bayh-Dole Act) does not automatically vest title to federally funded inventions for federal contractors or allow them to unilaterally take title to such inventions. Rather, the Bayh-Dole Act merely permits contractors to retain title to federally funded inventions that they have already obtained through assignment by the individual inventor.
Stanford University was the recipient of several National Institutes of Health (NIH) grants to study AIDS treatments. In 1988, Stanford commenced a collaboration with a local technology company, Cetus, to test the efficacy of new AIDS drugs, in part using Cetus’s polymerase chain reaction (PCR) technique. A Stanford research fellow, Dr. Mark Holodniy, developed a PCRbased procedure for calculating the amount of HIV virus in a patient’s blood while conducting research at Cetus. Upon joining Stanford, Dr. Holodniy had signed a contract agreeing to assign any inventions to Stanford. He signed a similar agreement assigning any inventions to Cetus as a condition of working at Cetus’s facilities. Dr. Holodniy continued his research at Stanford, and the University ultimately secured three patents to the HIV measurement process based on his research. Because Dr. Holodniy’s work was supported in part by the NIH, Stanford followed the procedures of the Bayh-Dole Act, notifying the U.S. government that Stanford intended to retain title to these “subject inventions.”
Meanwhile, Roche Molecular Systems acquired all of Cetus’s PCR-related assets and successfully commercialized Holodniy’s HIV testing procedure. In 2005, Stanford sued Roche, claiming that Roche was infringing the Holodniy patents. Roche argued that Dr. Holodniy’s assignment to Cetus rendered Roche a co-owner of the patents.
Roche argued that, because Dr. Holodniy signed an agreement stating that he “will assign and do[es] hereby assign” his interest in any inventions made “as a consequence of [his] access” to Cetus, it was a co-owner of the Holodniy patents. Stanford took the position that the Bayh- Dole Act automatically vests title with federal contractors, not individual employees, and thus that Dr. Holodniy had no rights to assign to Cetus. The district court ruled in Stanford’s favor, holding that Dr. Holodniy had no rights to assign to Cetus because, under the Bayh-Dole Act, the individual inventor of a federally funded invention may obtain title only after the government and the contractor have declined to do so. The Federal Circuit disagreed, holding instead that, as a matter of contract law, Dr. Holodniy’s agreement with Cetus operated to immediately assign his rights to Cetus, while his agreement with Stanford promised merely to assign his rights in the future. According to the Federal Circuit, the Bayh-Dole Act did not “automatically void ab initio” Dr. Holodniy’s interest in the invention and prevent Roche from asserting ownership. The Supreme Court granted certiorari.
Writing for a seven-justice majority, Chief Justice Roberts began by emphasizing the long history of and broad support for the general rule that rights in an invention belong to an inventor and can vest elsewhere only through assignment. “Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not.” Op. at 6. “In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.” Id. at 7-8.
The Court rejected Stanford’s contention that the Bayh-Dole Act reorders this normal priority by vesting title to federally funded inventions first in the inventor’s employer (the federal contractor), then in the U.S. government, and only then – if the contractor and the government decline to exercise their rights – in the inventor himself. It concluded that Congress has the power to divest inventors of their rights, and has done so in other contexts (the Atomic Energy Act and the Space Act, most notably), but did not do so in the Bayh-Dole Act. The Court interpreted the Bayh-Dole Act’s language referring to an “invention of the contractor” as referring only to inventions to which the contractor has contractual rights, by assignment or otherwise. Thus, the Act does not require contractor employees to assign their rights to their employers, but instead applies only when they already have done so. The Bayh-Dole Act’s purpose, said the Court, was merely to reassure contractors that the government would not assert rights in contractor-owned inventions developed using federal funds – not to alter the legal relationship between contractors and their employees. Op. at 11.
The Court concluded by observing that its decision should not affect the successful application of the Bayh-Dole Act. Universities typically require their employees to sign agreements assigning rights in their inventions to the institution. “With an effective assignment, those inventions – if federally funded – become ‘subject inventions’ under the Bayh-Dole Act, and the statute as a practical matter works pretty much the way Stanford says it should.” Op. at 15. In effect, then, the Supreme Court endorsed the Federal Circuit’s conclusion that a badly worded invention-assignment clause had cost Stanford the ability to pursue its claims against Roche.
Justice Breyer wrote a dissenting opinion, which was joined by Justice Ginsburg. The dissent argued that the majority’s view allows inventors to avoid the restrictions and conditions that the Bayh-Dole Act places on federal contractors and thus potentially deny the public benefits to which it is entitled because it funded the research in the first place.
Importantly, the decision raised but did not resolve the validity of the Federal Circuit’s controversial interpretation of patent assignment language. Relying on its 1991 opinion in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, the Federal Circuit distinguished between agreements in which inventors “agree to assign” their rights upon completing an invention and those in which they “do hereby assign” their rights in anything they may someday invent, with the latter type of agreement trumping the former. Justice Breyer’s dissent explicitly criticized this rule, and Justice Sotomayor wrote a separate concurrence stating that she shares Justice Breyer’s concerns. In a footnote, the majority responded that, because this issue is not one on which certiorari was granted, “we have no occasion to pass on the validity of the lower court’s construction,” leaving the door open for future consideration by the Court.