In Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, Inc., the U.S. Supreme Court held that the Bayh-Dole Act, a 1980 technology transfer law governing federally funded research, does not trump an inventor’s prior assignment of patent rights.

Inventions Arising From Employment

The inventor in Stanford was employed as a researcher at the University. He had signed an employment agreement requiring him to assign to the University any inventions resulting from his employment. The University allowed him to perform some of his work at another research facility, Cetus. As a condition to conducting work at Cetus, Cetus required the researcher to sign an agreement whereby he assigned to Cetus all of his inventions made as a consequence of his work at its facility. While at Cetus, the researcher developed a technique for testing the effectiveness of HIV treatments. After returning to the University, he and others refined his testing techniques. The University obtained patents on the testing technique and its refinements. The University also obtained patent assignments, including an assignment from the researcher. The defendant, Roche Molecular Systems, later purchased Cetus and commercialized the work that had been done there, including the researcher’s now patented testing techniques.

The University sued Roche for patent infringement. Roche asserted that it was a co-owner of the asserted patents via the researcher’s express assignment to Cetus. The University countered that the research was federally funded and, consequently, the patents were subject to the Bayh-Dole Act. Under Bayh-Dole, the federal government obtains a non-exclusive license to inventions that were conceived or first actually reduced to practice by work performed under a funding contract with an agency of the federal government, and allows the federal contractor to retain title to the inventions. Here, the University was the federal contractor, and thus under Bayh-Dole, the University should hold title to inventions conceived or reduced to practice during the University’s federally funded projects.

Bayh-Dole Does Not Operate to Divest Inventors of Their Patent Rights

The Court’s decision rests on the recognition that since the Patent Act of 1790, the first U.S. patent statute, the rule has been that the rights to an invention belong to the inventor. The Court contrasted the Bayh-Dole Act’s patent provisions to other acts where Congress expressly specified that titles in certain inventions vested in the federal government, such as certain inventions for atomic energy and NASA. The Court found no express language in the Bayh-Dole Act divesting patent rights from an inventor.

A key factor in the Court’s analysis was Bayh-Dole’s definition of a “subject invention” as “any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.” 35 U.S.C. § 201(e) (emphasis added). The Court construed this language, and thus the Bayh-Dole Act, to cover only inventions owned by the contractor. The Court rejected the University’s interpretation of this language as including inventions developed by its employees, which would have transferred title from the inventor to the University. Because the Bayh-Dole Act did not automatically vest the University with title in the inventions of its employees on federally funded projects, the University could not prove that it was the sole owner of the asserted patents, and thus lacked standing to sue Roche for patent infringement.

Critical Considerations

Given that the Supreme Court has confirmed that Bayh-Dole does not automatically override ownership of inventions by inventors, it is critical for universities and other federally funded entities to obtain title to inventions by express assignments from their employees and consultants. However, the Stanford decision does not clarify what the terms of the assignment agreements should be: the University’s agreement, where the employee had an “agreement to assign”; or the Cetus agreement, where there was an actual, present assignment of inventions. The dissent in Stanford focused on this ambiguity and argued that the case should have been remanded for clarification. It was not. Because the Court did not resolve this ambiguity, current case law remains intact, which means it is likely that mere “agreements to assign” are not sufficient to vest title in a university or other government contractor.

It is therefore advisable that all assignments require the assignee to both agree to assign all inventions and to “hereby assign” all inventions. With the addition of a present assignment of future inventions, a university or other government contractor would be best positioned to obtain, by operation of the contract language, legal title to inventions once made. The assignee would therefore own the inventions. This would classify the inventions to be “of the contractor,” as discussed above, and covered by the Bayh-Dole Act. Finally, other than intellectual property agreements with a university, no employee should be allowed to enter into any intellectual property agreement without permission of a university or other federally funded entity. Such a policy, if properly implemented in Stanford, would have avoided the conflicting assignments.