Supreme Court to hear Bayh-Dole Patent Ownership Dispute: Stanford v. Roche

Bd. of Trustees of Leland Stanford Jr. University v. Roche Molecular Systems, 09-1159 (Supreme Court 2010)

The Supreme Court has granted Stanford's petition for a writ of certiorari in Stanford v. Roche on an issue of patent ownership. Although the case may turn on federal patent law statutes, it looks substantially like derivative title issues considered in the law of property. The rule of derivative title generally bars a property owner from transferring rights greater than his own. One exception to the rule of derivative title is that, in certain situations, a bona fide purchaser can take title free of prior claims to the property.

The patents in this case involve methods for using PCR techniques to measure HIV concentration in blood plasma. Stanford scientists first created the invention while subject to a contractual duty to assign any inventions to Stanford. After agreeing to assign rights, but prior to the invention, one of the inventors (Holodniy) assigned his rights in his future inventions to Cetus (who later became Roche). Rather than a promise-to-assign, the assignment to Roche was an actual assignment of future inventions. Thus, on the contracts, Holodniy first promised-to-assign rights to Stanford but first actually-assigned rights to Cetus. Stanford later filed for patent protection and then demanded a royalty from Roche. The Federal Circuit held that Roche could not be liable for infringement because it held ownership rights based on the Holodniy assignment.

On appeal to the Supreme Court, Stanford has argued that its receipt of federal funding for the research somehow results in a superior claim to title. Stanford framed the question as follows:

Whether a federal contractor university's statutory right under the Bayh-Dole Act, 35 U.S.C. §§ 200-212, in inventions arising from federally funded research can be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor's rights to a third party.

The US Department of Justice filed a brief supporting the petition and argues that the Bayh-Dole Act does indeed establish a "framework for determining ownership interests in federally funded inventions." The Government brief argues that the Bayh-Dole Act flips the normal statutory rule that patent rights first vest with the inventor. Instead, in their view, by virtue of receiving federal funding, the university or federal contractor automatically receives title to the invention and then may "elect" to not "retain title." Under that interpretation of the law, Stanford retains full title because it received federal funding for the research and elected to pursue patent protection. The Government frames the question as follows:

Whether an inventor who is employed by a [federal] contractor that elects to retain rights in an invention may defeat the contractor's right to retain title under the Bayh-Dole Act by contractually assigning his putative rights in the invention to a third party.

The Federal Circuit rejected these questions – holding instead that the Bayh-Dole Act was not designed to automatically void contractual transfers made by an inventor simply because the research received federal funded.

In addition to the Government Brief, additional petitions-stage briefs were filed by a number of universities and university-controlled organizations that all supported the petition.

Comment: The cause of Stanford's plight is the University's failure to negotiate a tight assignment agreement with its researchers and scientists. If it has not done so yet, Stanford could fix the issue by forcing its students and employees to agree to a new assignment agreement. Thus, this particular issue is solved by contract law. A real ongoing question that the Supreme Court should focus-on with this decision involves the rights of third-party inventors who are not under any contractual duty to assign rights to a university or federal contractor. Does that third party retain rights when the University can show that the invention process was at last partially federally funded. This issue arises in collaborative projects where the work of a subset of inventors receives federal funding.

29 thoughts on “Supreme Court to hear Bayh-Dole Patent Ownership Dispute: Stanford v. Roche

  1. We are compiling a list of firms that have clients that would like to see things go a different way than that proposed by AUTM and others insisting B-D is a vesting statute. IP Advocate has commissioned David Swenson of RKMC to prepare an Amicus for the case in support of student and faculty freedom to research, invent, and contract. Please contact us at rkaswan@IPAdvocate.org We are seeking allied parties.

  2. The CAFC moves on, as noted in a blurb from teh IPO Daily News from yesterday:

    Agreement to Assign Patents in Future not Sufficient for Standing — Abraxis Bioscience, Inc. v. Navinta LLC, 2009-1539 — On November 9 in an opinion by Judge Gajarsa, the Federal Circuit vacated the district court’s judgment of patent infringement because Abraxis lacked standing to file the suit…The court determined that Abraxis did not have title to the patents at the time it filed its complaint because a contract it executed was not an actual transfer of patent rights but merely obligated AstraZeneca-UK to transfer in the future.

  3. fioricet neurophysiologyfioricet fertility
    Upcoming literacy or high-profile discussion is a principal guarantee which needs on important government, medieval destiny, localized projects and theatre communities to fail trust, domination and copy programs, currently thus as moving the program psychology of those traditions.

  4. A few years ago, Kathleen Sullivan (who I’m guessing will end up arguing the case on behalf of Roche), did faculty inventors a huge disservice by convincing a sharply split California Supreme Court that Genentech owed City of Hope no fiduciary duty, even though it was the exclusive promoter of City of Hope’s inventions, and even though black letter law in California clearly imposed such a duty on Genentech.

    It would be nice to see her redeem herself here by protecting faculty freedom of contract and property.

  5. Mr. “ping”:

    Your observation of Mr. Mooney’s comment stands as a testament to the infirmities of the chapter in Title 35 entitled “Invention made with federal assistance”, and your further observation re the provisions within Section 202 further the point that the entire purpose of the Bayh-Dole Act was to take a patchwork of widely divergent agency policies and coalesce them to the greatest extent possible into a single policy. The same is true of your observation that Title 35 is not on the “list”, for the obvious reason that Title 35 articulated no policy at the time of Bayh-Dole’s enactment having anything to do with the divergent federal agency policies scattered throught numerous sections of the US Code.

    It is for the above and other reasons that I found the spate of briefs in support of Stanford’s position re Bayh-Dole decidedly unpersuasive because they all read out “inventor” and substitute in its stead “recipient of federal funds under a funding agreement”.

    BTW, to understand just how hosed up is the understanding of many federal agencies, it used to be that the DOD long ago adopted a policy that even where a contractor did have title, with the USG having a non-exclusive, paid-up license, if the contractor later sold products (domestically of internationally) or granted a license (also domestically or internationally)pertaining to that on which it held title, the USG was entitled to a cut of the contractor’s “financial action”. “Used to be” signifies that the policy has been relegated to past tense.

  6. Now as soon as I find out WHO REALLY THREATENED ME? I think I know. the word goes well with PIGGY… Then I have a whole new clock on that toooooooo…..And i will find out. This is a constitutional problem first. Then you peel them other layers. Especially the ones about redacting .

  7. Iza also note that the express list given in Section 210 does not include any of Title 35.

    Feel free to draw your own answers.

  8. Meanwhile, I’ll note my percep[tive observation that within the section noted above, specificalyy Section 202 has this little sentence: The rights of the nonprofit organization or small business firm shall be subject to the provisions of paragraph (c) of this section and the other provisions of this chapter.” Since the chapter is of course chapter 35, this may indicate that the provisions of the Bayh-Dole are expressly subservient to the Act’s pre-existing laws regarding ownership, and in no way do the provisions override those pre-existing laws.

    Just an observation.

  9. I am merely noting that any argument having the operative effect of reading “inventor” out of the constitutional provision should give us all great pause for concern.

    Why?

  10. EG,

    Before jumping onboard the “contractor owns it train”, I would step back and consider a much more fundamental question. By what authority does the federal government have the right under law to determine that title to an invention resides in the first instance with a contractor, and not the employed inventor? The same could be asked of copyright’s work for hire, but that is a different discussion from this one that is limited to patents.

    Where Bayh-Dole fell flat on its face was its underlying assumption that parties to funding agreements had their acts together and already had employee agreements in place wherein title to inventions resided with the contractors. It seems not to have occurred to its drafters that the assumption may have been erroneous.

    As we all well know, Article 1, Section 8, Clause 8 provides that exclusive rights go to “inventors”. Perhaps you or someone else might be able to explain how it is that a federal statute can create what would in essence be a patent law work for hire doctrine, vesting title in the first instance in a recipient of federal funds under a funding agreement, and not the actual inventor(s).

    Importantly, I am not expressing any opinion on who should hold what in this particular case. I am merely noting that any argument having the operative effect of reading “inventor” out of the constitutional provision should give us all great pause for concern.

  11. If the first one is valid and they claim the second wasn’t necessary. Or even if they claim the first one’s not valid and the second one is. Then we know that if that either way the claimed debt was fraudulent to begin with. And this was done because of the fraudulent debt,]. And holding me so i can’t SUE (1st. POINT)
    If the first one is invalid because it was never real to begin with. And the second (one was made as a second Patent rather that a CIP because HE knew the first one was not what it was supposed to be. Then that speaks for itself and the second Atty. had his own ideas about keeping it for himself. But had designs on it as his own
    And is being protected so I can’t SUE(2nd point).
    And if the PTO knows that both these points are valid and they continue the farce by allowing this to go on because of what they knew was going on all along! (Point Three)
    Then I guess after tomorrow I try the DOJ again. But this time I also have the STATE Atty. that took this and ran with it. And never said anything to me EXCEPT I am your Atty. And then continued to tell me to get lost. and for the life of me how’ddd he do dattt? (Point Four) State problem there.

  12. One comment. If the Supremes are looking to take another slap at the Federal Circuit, they could possibly reverse based on the Circuit’s failure to properly weigh the equities involved. I presume it’s a matter of California state law (a topic on which I will readily admit a lack of knowledge), but Roche’s actions might generally be argued to constitute tortious interference with contract, such that Roche would lack the clean hands necessary for seeking equitable relief. This would yield a sensible resolution of the matter without having to reach construction of Bayh-Dole at all.

    Or was this issue reached by the district court in deciding whether an expectancy can be assigned under California state law?

  13. DOJ brief’s view that Federal Circuit panel is “contrary to the uniform scheme for the allocation of patent rights in federally funded inventions that the Bayh-Dole Act was intended to establish” is the one I voiced when the panel decision came out. It will be interesting to see if SCOTUS buys into this argument-oh my, I’m getting queasy at the thought that an argument I agree with that’s at least tangentially related to IP might be bought into by SCOTUS.

  14. “by forcing its students”

    Coercion?

    What patent law really needs are laws to prevent coercion of inventors by those in power.

  15. One concern is whether a contract where Stanford agreed to assign a patent to a third party would be enforceable/binding on Stanford if any government money was involved. The implications of a finding for Stanford might create serious preemption issues even for Stanford’s own contracting activities. E.g., could Stanford agree to settle an interferenc by assigning its patent to the other party? If it did so, would Bayh-Dole trump the assignment?

  16. Of course not. That’s an excellent example of why you can’t always get an injunction because your right and your remedy aren’t the same thing.

    And that’s an excellent example of trying to change the subject so that everyone will forget the (patronizing) nonsense you spouted earlier.

    Consider it forgotten.

  17. So, when the cashier gives your hamburger to the guy in front of you, you’re entitled to track him down and reclaim it, because it was assigned to you, right?

    You mean you wouldn’t tap him on the shoulder and politely inform him that he was mistakenly given your burger? Seems a perfectly reasonable thing to do, all legalities aside.

    And if the artist changes his mind, you can force him to paint it, because it was assigned to you, right?

    Of course not. That’s an excellent example of why you can’t always get an injunction because your right and your remedy aren’t the same thing.

  18. If you prefer a more mundane example, when you go to McDonald’s you enter into a contract and pay before they make your food.

    That’s a great example! So, when the cashier gives your hamburger to the guy in front of you, you’re entitled to track him down and reclaim it, because it was assigned to you, right?

    … even before that you could commission a portrait that hadn’t yet been painted.

    Another good one! And if the artist changes his mind, you can force him to paint it, because it was assigned to you, right?

    An executory promise to deliver something, even a specific something, is not the same as an assignment.

  19. How do you assign something that hasn’t been created yet?

    That happens all the time. Back when people used to build houses for money, you could buy one that hadn’t yet been built. Before that, you could buy any article of manufacture that happened to be on back-order, and even before that you could commission a portrait that hadn’t yet been painted.

    If you prefer a more mundane example, when you go to McDonald’s you enter into a contract and pay before they make your food.

  20. Dude,

    There are plenty of “strange concepts” in the Law. Thus, your premise of the only thing you *can* do is wrong at the start.

    Get used to it.

  21. How do you assign something that hasn’t been created yet? What a strange concept. The only thing you *can* do is promise to assign something that you will create in the future. Stanford should win b/c the inventor promised to assign to Stanford before he executed this fictitious “future assignment”.

  22. “Why would Kappos’ group have special insight here?”

    Perhaps because they understand Title 35 provisions, and that “teeny” part of Article 1, Section 8, Clause 8 that mentions “inventors”, and not “recipients of federal funds under a funding agreement”.

    If this is the best that the DOJ can come up with, then perhaps its “brief” should be relegated to a “circular file”.

  23. Why would Kappos’ group have special insight here?

    How bouts cause statutory patent law be invoked which may (or may not) counter the other statutory law argument?

  24. Why would Kappos’ group have special insight here? It’s a contract issue wrapped up in a statutory construction issue. Justice is as good as any for this (take that as you will, however).

  25. Too many questions here, lots seemingly specific to state contract law. I’m sort of surprised cert was granted.

    Can Stanford pre-emptively divest itself through an agreement pre-dating the federal funding?

    Does Stanford need to affirmatively elect under 35 USC?

    Can Stanford affirmatively un-elect through an agreement post-dating the federal funding?

    Is there a requirement that an employee or contractor have some sort of notice, and if so, what is the level–actual, constructive, implied…?

    Does it matter if the contract was an employment contract or not?

    Hey Dhuey, pass me one of your hockey-puck-sized Valiums…

Comments are closed.