INNsight article by Gretchen L. Temele

Recently, the U.S. Supreme Court reaffirmed the principle that rights to an invention belong to the individual inventor. In a case closely followed by U.S. universities, the generic drug industry and biotech companies, the Court—in Board of Trustees of the Leland Stanford Jr. University v. Roche Molecular Systems—held that inventions resulting from federally funded projects are not automatically owned by the institution where the federally funded research was conducted.  For the pharmaceutical and biotechnology industries, where collaborations with universities are widespread, this case underscores the importance of clarifying who owns what at the very earliest stages of the patent process.

The Bayh-Dole Act

To understand the significance of the Court’s reasoning, it is helpful to understand the rationale behind the Bayh-Dole Act. Congress enacted the Bayh-Dole Act, formally known as the University and Small Business Patent Procedures Act of 1980, to benefit the public by promoting the utilization of inventions developed with federally supported research. The Act provides a framework for universities, nonprofit institutions and small businesses—described in the Act as "contractors"—to "elect to retain title" in inventions resulting from that research. The contractors are expected to seek patent protection on inventions they choose to own and to promote the commercialization of those inventions. The government retains so-called "march-in rights." If the contractor chooses not to retain title to the invention, the government may grant requests for a return of those rights to the inventor or grant a license to a third party. The Bayh-Dole Act is widely credited with fostering the development of thousands of new businesses and the introduction of many new products, including pharmaceuticals, to the public

The Facts of Stanford v. Roche

If the Bayh-Dole Act provides a framework for allocating patent rights, Stanford v. Roche deals with when those rights vest. Here, Stanford researcher Mark Holodniy was under a prior contractual duty to "agree to assign" invention rights to Stanford and set out to develop a sensitive PCR-based blood test for the detection of HIV. His supervisor at Stanford arranged for him to perform his research at Cetus, a biotechnology company with significant know-how in PCR technology.  At Cetus, Holodniy signed an agreement, stating that he "will assign and do[es] assign to Cetus" his rights in inventions made during his work there. Holodniy's research led to the successful development of a commercial assay kit for HIV detection in blood samples. Holodniy's research also led Stanford to obtain three patents on the HIV detection technology.

The Lower Court Decision

When Stanford sued Roche (Cetus' successor in interest) for patent infringement, Roche's defense was that it was a co-owner of the invention and could not be held liable for patent infringement. The Court of Appeals for the Federal Circuit agreed with Roche. The Federal Circuit's decision turned on the wording of Holodniy's assignments. The circuit court noted that the assignment to Stanford amounted to a promise to assign future rights (agree to assign), while the assignment to Cetus provided immediate assignment (do assign) of rights to Cetus. Stanford appealedy.

The Supreme Court Decision

In a 7–2 decision, the Court held that the Bayh-Dole Act's (the "Act") provision that contractors may "elect to retain title" confirms that the Act does not vest title to an invention in anyone other than the inventor.  The Court emphasized that the Act's disposition of rights "serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more. Writing for the majority, Justice Roberts noted that "You cannot retain [title] unless you already have it.

In concluding, the Court stated that if Congress had intended to change one of the fundamental tenets of patent law—thereby potentially depriving inventors of their rights to own their inventions—it would have done so very clearly and without ambiguity. Stanford contended that to interpret the Bayh-Dole Act as not vesting title to federally funded inventions in federal contractors "fundamentally undermin[es]" the Act's framework and deeply impacts its continued "successful application." The Court disagreed, pointing to the common practice of contractors in routinely obtaining assignments of a patent ownership rights from their employees. Such a practice, the Court noted,  would be unnecessary if title in the inventions were to automatically vest with the contractor.