Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., Et Al.
Since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor. The question in the case was whether the University and Small Business Patent Procedures Act of 1980—commonly referred to as the Bayh-Dole Act—displace that norm and automatically vest title to federally funded inventions in federal contractors.
In 1985, a small California research company called Cetus began to develop methods for quantifying blood borne levels of human immunodeficiency virus (HIV). A Nobel Prize winning technique developed at Cetus—polymerase chain reaction, or PCR—was an integral part of these efforts. PCR allow billions of copies of DNA sequences to be made from a small initial blood sample.
In 1988, Cetus began to collaborate with scientists at Stanford University’s Department of Infectious Diseases to test the efficacy of new AIDS drugs. Dr. Mark Holodniy joined Stanford as a research fellow in the department around that time. When he did so, he signed a Copyright and Patent Agreement (CPA) stating that he agreed to assign to Stanford his “right, title and interest in” inventions resulting from his employment at the University.
At Stanford Holodniy undertook to develop an improved method for quantifying HIV levels in patient blood samples, using PCR. Because Holodniy was largely unfamiliar with PCR, his supervisor arranged for him to conduct research at Cetus. As a condition of gaining access to Cetus, Holodniy signed a Visitor’s Confidentiality Agreement (VCA). That agreement stated that Holodniy assigned 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 PCR-based 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. Stanford secured three patents to the HIV measurement process.
In 1991, Roche Molecular Systems, a company that specializes in diagnostic blood screening, acquired Cetus’s PCR-related 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.
Some of Stanford’s research related to the HIV measurement technique was funded by the National Institutesof Health (NIH), thereby subjecting the invention to the Bayh-Dole Act. Accordingly, Stanford disclosed the invention, conferred on the Government a nonexclusive, nontransferable, paid-up license to use the patented procedure, and formally notified NIH that it elected to retain title to the invention.
In 2005, the Board of Trustees of Stanford University filed suit against Roche Molecular Systems, Inc., Roche Diagnostics Corporation, and Roche Diagnostics Operations, Inc. (collectively Roche), contending that Roche’s HIV test kits infringed Stanford’s patents. Roche responded by asserting that it was a co-owner of the HIV quantification procedure, based on Holodniy’s assignment of his rights in the Visitor’s Confidentiality Agreement. As a result, Roche argued, Stanford lacked standing to sue it for patent infringement. Stanford claimed that Holodniy had no rights to assign because the University’s HIV research was federally funded, giving the school superior rights in the invention under the Bayh-Dole Act.
The District Court held that the “VCA effectively assigned any rights that Holodniy had in the patented invention to Cetus,” and thus to Roche. But because of the operation of the Bayh-Dole Act, “Holodniy had no interest to assign.” The court concluded 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.”
The Court of Appeals for the Federal Circuit disagreed. First, the court concluded that Holodniy’s initial agreement with Stanford in the Copyright and Patent Agreement constituted a mere promise to assign rights in the future, unlike Holodniy’s agreement with Cetus in theVisitor’s Confidentiality Agreement, 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. The court held that Roche possessed an ownership interest in the patents-in-suit. The Court of Appeals then remanded the case with instructions to dismiss Stanford’s infringement claim.
The Supreme Court observed that unless there is an agreement to the contrary, an employer does not have rights in an invention “which is the original conception of the employee alone.” Dubilier Condenser Corp., 289 U. S., at 189. Such an invention remain the property of him who conceived it. In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.
Stanford and the United States as amicus curiae contended that the Bayh-Dole Act reorders the normal priority of rights in an invention when the invention is conceived or first reduced to practice with the support of federal funds. In their view, the Act moves inventors from the front of the line to the back by vesting title to federally funded inventions in the inventor’s employer—the federal contractor.
The Supreme Court observed that Congress had in the past divested inventors of their rights in inventions by providing unambiguously that inventions created pursuant to specified federal contracts become the property of the United States. For example, with respect to certain contracts dealing with nuclear material and atomic energy, Congress provided that title to such inventions “shall be vested in, and be the property of, the Atomic Energy Commission.” 42 U. S. C. §2182. Congress had also enacted laws requiring that title to certain inventions made pursuant to contracts with the National Aeronautics and Space Administration “shall be the exclusive property of the United States,” Pub. L. 111–314, §3, 124 Stat. 3339, 51 U. S. C. §20135(b)(1), and that title to certain inventions under contracts with the Department of Energy “shall vest in the United States.” 42 U. S. C. §5908. Such language was notably absent from the Bayh-Dole Act. Nowhere in the Act were inventors expressly deprived of their interest in federally funded inventions. Instead, the Act provided that contractors may “elect to retain title to any subject invention.” 35 U. S. C. §202(a).
The Bayh-Dole Act’s provision stating that contractors may “elect to retain title” confirm that the Act does not vest title. 35 U. S. C. §202(a). Stanford reach the opposite conclusion, but only because it read “retain” to mean “acquire” and “receive.” The Bayh-Dole Act did not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assured contractors that they may keep title to whatever it is they already have. Such a provision made sense in a statute specifying the respective rights and responsibilities of federal contractors and the Government.
The Bayh-Dole Act applied to subject inventions conceived or first actually reduced to practice in the performance of work funded in whole or in part by the Federal Government. 35 U. S. C. §§201(e), 201(b). Under Stanford’s construction of the Act, title to one of its employee’s inventions could vest in the University even if the invention was conceived before the inventor became a University employee, so long as the invention’s reduction to practice was supported by federal funding.
The Supreme Court disagreed with Stanford’s contention that reading the Bayh-Dole Act as not vesting title to federally funded inventions in federal contractors fundamentally undermine the Act’s framework and severely threatened its continued successful application. The judgment of the Court of Appeals for the Federal Circuit was thus affirmed.