Reaffirming The Inventor's Role In Patent Ownership

Previously published in Westlaw Journal Intellectual Property

The Supreme Court delivered its opinion in June in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems Inc., 131 S. Ct. 2188 (June 6, 2011), the first affirmance of a Federal Circuit patent law analysis in years.1

This was also the first time the court had ever tackled interpretation of the University and Small Business Procedures Act of 1980 (better known as the Bayh-Dole Act, 35 U.S.C. §§ 200-212). At issue was whether the provisions of the Bayh-Dole Act automatically grant ownership of federally funded inventions to research institutions rather than to the inventor.

The Bayh-Dole Act allows research institutions to retain title to inventions funded by federal research money. Since its enactment, the number of patents American universities seek annually has increased tenfold.2

Before the Bayh-Dole Act was enacted in 1980, the federal government had no uniform policy for the ownership of the fruits of the research it funded. Some agencies retained ownership of inventions derived from research they funded. Other agencies allowed institutions to retain ownership of inventions they developed through federally funded research, in exchange for a license granting the federal government permission to use the patented invention.

Each of these approaches had problems. When the government retained ownership, patents were rarely put to use commercially.3 Under the licensing approach, industry had to contend with more than 26 agency policies, which proved a confusing administrative burden.

In response, Congress enacted Bayh-Dole. The act formalized the ownership rights between research institutions (called "contractors" under Bayh-Dole) and the federal government.

Under Bayh-Dole, a contractor can gain ownership of a government-funded invention as long as the contractor meets certain requirements, such as disclosing the invention to the agency and making a written election to retain title to the patent. Otherwise, the government may receive title. In any case, the government retains "march-in rights," permitting it, under certain circumstances, to require the contractor to grant a license to a third party.

The wording of the Bayh-Dole Act posed a potential conflict with established federal patent law, however. In Stanford v. Roche, the question arose as to how Section 101 of the Patent Act, 35 U.S.C. § 101, fits into the Bayh-Dole framework.

Normally, under the Patent Act, ownership of a patent rests with the inventor. Section 101 says "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent."

What happens, then, if an inventor, exercising rights apparently granted under the Patent Act, assigns his rights to a third party, rather than to the contractor for a government-funded invention? If Bayh-Dole automatically vests ownership in the contractor, an assignment by the inventor is subject to the contractor's superior rights. If the ownership rests with the inventor, however, it appears that an inventor could subvert the framework of Bayh-Dole.

FACTS OF STANFORD V. ROCHE

The three patents-in-suit at issue in the case are directed to methods for quantifying HIV in human blood samples and correlating those measurements to the effectiveness of drugs that fight the retrovirus. The claimed methods use the polymerase chain reaction technique for measuring the level of ribonucleic acid from HIV in the blood of infected humans.

PCR is a common laboratory technique that provides copies of DNA segments for, among other applications, identifying genes or testing for diseases.

In 1988 Stanford University hired Dr. Mark Holodniy as a research fellow to develop a PCR-based screen for HIV. When he was hired, Holodniy signed a "copyright and patent agreement" obligating him to assign his inventions to the university.

The agreement stated the following: "I agree to assign or confirm in writing to Stanford and/or sponsors that right, title and interest in ... such inventions as required by contracts or grants."

Shortly thereafter, and while still employed by Stanford, Holodniy began regular visits to Cetus, a company that developed PCR techniques in the early 1980s. Holodniy also signed Cetus' "visitor's confidentiality agreement," which said "[Holodniy] will assign and do[es] hereby assign to Cetus, [his] right[,] title, and interest in each of the ideas, inventions and improvements" that he may devise from his work at Cetus.

Stanford and Cetus were also parties to "materials transfer agreements" permitting Stanford to use PCR-related materials and information.

In 1991 Roche purchased Cetus' PCR business (including its agreements with Holodniy and Stanford) and began manufacturing HIV detection kits that screened for retroviral RNA.

Stanford filed the parent application to the patents-in-suit May 14, 1992. Holodniy, however, did not execute a written assignment of his rights in that application to Stanford until 1995.

In 2005 Stanford sued Roche in...