Supreme Court Clarifies Patent Ownership Under Bayh-Dole Act
As a result of Leland Stanford Junior University v. Roche Molecular Systems, Inc., No. 09-1159, organizations and universities subject to the Bayh-Dole Act should construct more effective assignment agreements with their employees instead of relying on the Bayh-Dole Act to automatically vest title. The Supreme Court has held that the Bayh-Dole Act does not automatically vest title of federally-funded inventions to federal contractors or “authorize contractors to unilaterally take title to such inventions.” Rather, the Court held that the Bayh-Dole Act only allows federal contractors to elect to retain title to federally-funded inventions that the federal contractor already owns typically through the use of an employee assignment.
In concurring and dissenting opinions by three justices, the Supreme Court signaled it might evaluate in a future case the principles adopted by the Federal Circuit in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (1991), and the application of those principles to agreements that implicate the Bayh-Dole Act. FilmTec held that “[o]nce the invention is made and [the] application for [a] patent is filed,…legal title to the rights accruing thereunder would be in the assignee…, and the assignor-inventor would have nothing remaining to assign.”
The present case involved a company, Cetus, that in 1985 began to develop methods for quantifying blood-borne levels of human immunodeficiency virus (HIV), the virus that causes AIDS. In 1988, Cetus began to collaborate with scientists at Stanford University to test the efficacy of new AIDS drugs. Dr. Mark Holodniy joined Stanford as a research fellow around that time. When he did, he signed a copyright and patent agreement (CPA) stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions relating from his employment at the university. Holodniy’s supervisor arranged for him to conduct research at Cetus. As a condition of gaining access to Cetus, Holodniy signed a visitor’s confidential agreement (VCA). That agreement stated that Holodniy “will assign and do[es] hereby assign” to Cetus his “right, title and interest in each of the ideas, inventions, and improvements” made “as a consequence of [his] access” to Cetus. Working with Cetus employees, Holodniy devised a procedure for calculating the amount of HIV in a patient’s blood. That technique allowed doctors to determine whether a patient was benefiting from HIV therapy.
Holodniy then returned to Stanford where he and other university employees tested the HIV measurement technique. Over the next few years, Stanford obtained written assignments of rights from the Stanford employees involved in refinement of the technique, including Holodniy, and filed several patent applications related to the procedure that eventually resulted in three patents. In 1991, Roche Molecular Systems (“Roche”) acquired Cetus’ assets including all rights Cetus had obtained through agreements like the VCA signed by Holodniy. After conducting clinical trials on the HIV quantification method developed at Cetus, Roche commercialized the procedure.
In 1980 Congress passed the Bayh-Dole Act. The Bayh-Dole Act regulates the ownership rights of federally-funded inventions between the federal government and federal contractors. The Act applies to federally-funded “subject inventions” and allows contractors to “elect to retain title to any subject invention” by fulfilling several statutorily imposed obligations. The Bayh-Dole Act applied to the HIV measurement technique developed by Holodniy because the National Institute of Health (NIH) funded some of Stanford’s research related to the invention.
In 2005, Stanford filed suit against Roche, claiming that Roche’s HIV test kits infringed Stanford’s patents. Roche asserted that Stanford lacked standing to sue for patent infringement because Roche was a co-owner of the HIV measurement technique pursuant to Holodniy’s. Stanford disagreed, arguing that it had exclusive and superior rights to the invention under the Bayh-Dole Act because the research was federally funded.
The District Court held that the “VCA effectively assigned any rights that Holodniy had in the patented invention to Cetus” and thus to Roche. Because of the operation of the Bayh-Dole Act, “Holodniy had no interest to assign.” The District Court held that the Bayh-Dole Act “provides that the individual inventor may obtain title” to a federally-funded invention “only after the government and the contracting party have declined to do so.”
On appeal, the Federal Circuit reversed the District Court and held that Stanford lacked standing because the Bayh-Dole Act did not automatically void Roche’s ownership interest in the patents in the suit. First, the Court concluded that Holodniy’s initial agreement with Stanford and the CPA constituted a near promise to assign rights in the future, unlike Holodniy’s agreement with Cetus and the VCA which itself assigned Holodniy’s rights in the invention to Cetus. Therefore, as a matter of contract law, Cetus obtained Holodniy’s rights in the HIV quantification technique through the VCA. Second, the Court explained that the Bayh-Dole Act does not automatically void ab initio the inventor’s rights in government funded inventions” and that the “statutory scheme did not automatically void the patent rights that Cetus received from Holodniy.”
In a 7-2 decision, the Supreme Court agreed with the Federal Circuit that the Bayh-Dole Act does not automatically vest title to federally-funded inventions in federal contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have. The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—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. Only when an invention belongs to the contractor does the Bayh-Dole Act come into play.