Employers (particularly universities): check your invention assignment agreements!
The case arose from Stanford’s allegations that Roche infringed three U.S. Patents relating to HIV. The backstory is that when inventor Dr. Mark Holodniy joined Stanford as a research fellow, he signed a Copyright and Patent Agreement stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment at Stanford. Holodniy then sought to develop an improved method for quantifying HIV in blood samples using a particular technique for amplifying the HIV genes, called polymerase chain reaction (PCR). But because Holodniy had little expertise in PCR, he worked “on-loan” with PCR experts at Cetus (subsequently purchased by Roche), where he signed a Visitor’s Confidentiality Agreement that stated that he “will assign and hereby 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.
Holodniy’s research was ultimately successful: PCR is used in Roche’s HIV test kits throughout the world, and Stanford obtained patents related to the HIV measurement technique, which it subsequently asserted against Roche after license talks broke down. Roche argued that, based on its Visitor’s Agreement, it at least co-owned the HIV quantification methods. Stanford countered that Holodniy had no rights to convey to Roche because the University’s HIV research was federally funded by the NIH, and under the Bayh-Dole Act (35 U.S.C. §§ 201(c), (e), 202(a)) the university automatically took title to Holodniy’s inventions if it so elected.
The district court, siding with Stanford, held that the Bayh-Dole Act provides that an inventor may obtain title to a federally funded invention only if the government and the funded institution decline to do so, i.e., Holodniy had no right to assign anything. The federal circuit reversed, however, holding that the Stanford agreement constituted a “mere promise to assign rights in the future,” unlike the Visitor’s Agreement, “which itself assigned Holodniy’s rights in the invention to Cetus.” Importantly, the federal circuit held that the Bayh-Dole Act does not void automatically either an inventor’s rights in government-funded inventions or the patent rights that Roche enjoyed via Holodniy’s execution of its Visitor’s Agreement.
On appeal to the Supreme Court, Stanford’s position was backed by the U.S. Government Together they argued 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. The Supreme Court disagreed, and in affirming the federal circuit stated that: “Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not.” The Court went on to note that: “Nowhere in the [Bayh-Dole] Act is title expressly vested in contractors or anyone else; nowhere in the Act are inventors expressly deprived of their interest in federally funded inventions. Instead, the Act provides that [universities] may ‘elect to retain title to any subject invention.’”
In short, the Court said that: “The Bayh-Dole Act does not confer title to federally funded inventions on contractors …; it simply assures contractors they may keep title to what they already have.” Although Stanford argued that title to inventions supported by federal research “vested in the contractor by operation of law,” the Court concluded that: “We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly—not obliquely through an ambiguous definition of ‘subject invention’ and an idiosyncratic use of the word ‘retain.’” Regarding the term “retain,” the Court advised that Stanford’s contention that “‘retain’ must be read as a synonym for ‘acquire’ or ‘receive’ … dooms its argument ...” because such a reading is inconsistent with § 202(d) of Bayh-Dole, which allows for the “retention of rights by the inventor.”
Though unnecessary for its conclusion, the Court pointed out that the common practice under Bayh-Dole was for contractors to obtain assignments from their employees and that federal agencies, e.g., NIH, advised contractors to “have in place employee agreements requiring an inventor to ‘assign’ or give ownership of any invention to the [contractor] upon acceptance of federal funds.” These policies would be unnecessary if Stanford’s reading of Bayh-Dole were correct.
The Court ultimately held that the Bayh-Dole Act’s disposition of rights simply clarified the order of priority of rights between the federal government and the institution in a federally funded invention provided that the invention already belonged to the institution.
Practitioners note: employers and other entities can best protect their ownership interests in new inventions by reviewing the conveyance language in their standard employment agreements, etc., making sure that they require the “present assignment” of inventions as of the execution of the agreement, rather than containing a mere promise to assign in the future.