Letter from AmeriKat I: US Supreme Court ruling in Stanford v Roche

The rain has come to London. Rumor has it that while the AmeriKat was at INTA in May the sun was shining down on the now rain-saturated streets. Now, with her paw pads slipping on her wood floor and her whiskers dripping over her bowl of milk she finds those rumors hard to believe. However, the rain's refreshing qualities are meant to rejuvenate the old and bring in the new - which may go some way of explaining the recent appearance of at least two newly designed IP chambers' websites, as well as the AmeriKat's desire to purchase a brand new clutch in the summer sales. But prior to the tides of torrential rains gracing London's streets, the US Supreme Court issued a flurry of IP decisions - including last week's i4i case (see AmeriKat report here). Now, in an unique moment of silence, of which it is sure to be interrupted, the AmeriKat has set out the tail of the Stanford v Roche patent assignment case, which was decided by the US Supreme Court on 6 June 2011.

Background

A year before the AmeriKat formally became a kitten, in 1985 Cetus, a small California research company, began to develop methods for quantifying bloodborne levels of the human immunodeficiency virus (HIV), the precursur to AIDS. The technique developed at Cetus called polymerase chain reaction (PCR) was a key part to this method of quantification. Cetus then began collaborating with Stanford University's Department of Infectious Diseases to test the the new AIDS drugs and with this collaboration came Dr. Mark Holodniy. Dr. Holodniy joined Stanford as a research fellow where he worked to develop an improved method for quantifying HIV levels in blood samples using PCR. Under his employment with Stanford, Holodiny signed a Copyright and Patent Agreement which stated that he "agree[d] to assign" to Stanford his "right, title and interest in" inventions resulting from his employment there.

Holodniy was unfamiliar with PCR and so it was arranged that he would conduct his research at Cetus. As a precondition for gaining access to Cetus, Holodniy signed a Visitor's Confidentiality Agreement (VCA) which 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". And so, with the VCA signed Holodniy conducted his research at Cetus where he devised a PCR-based procedure for calculating the amount of HIV in a patient's blood allowing doctors to determine whether a patient was benefiting from HIV therapy. Along with colleagues at Stanford, Holodniy tested the technique and over the next few years Stanford obtained written assignments of rights from Holodniy's colleagues involved int he refinement of the technique. With these written assignments in their pocket, Stanford (picture, above right) filed several patent applications related to the procedure and secured three patents.

In 1991, Roche Molecular Systems acquired Cetus's PCR-related assets including the rights Cetus had obtained through agreements such as the VCA signed by Holodniy. Roche commercialized the procedure developed by Holodniy after they conducted clinical trials. Today, Roche's HIV tests "kits are used in hospitals and AIDS clinics worldwide." The Board of Trustees of Stanford University brought a lawsuit against Roche claiming that these HIV tests kits infringed Stanford's Patents. Roche argued that Holodniy's agreement with Cetus gave it co-ownership of the technique and therefore Stanford lacked standing to bring the suit. Stanford argued that Holodniy had no rights to assign to Cetus in the first place because Stanford had superior rights under the Bayh-Dole Act. The Federal Court agreed with Stanford, but the Court of Appeals for the Federal Circuit (where all patent cases from the federal circuit appeal to), held that Holodniy's agreement with Stanford was only a "mere promise to assign rights in the future" and it was his agreement with Cetus that actually assigned his rights. The CAFC also held that the Bayh-Dole Act did not automatically void an inventor's rights in federally funded inventions. Which brings us on to....

The Bayh-Dole Act

In 1980 the US Congress passed the Bayh-Dole Act with the object that it would

"promote the utilization of inventions arising from federally supported research...promote collaboration between commercial concerns and nonprofit organizations...[and] ensure that the Government obtains sufficient rights in federally supported inventions"

To meet this objective, the Act allocates rights in federally funded inventions between the Federal Government and federal contractors, including a non-profit institutions such as a university. Under section 202(a) of the Act, contractors may elect to retain title to the invention as long as they fulfil a number of obligations imposed by the Act, such as disclosing the invention to the Federal agency and filing for a patent application prior to any statutory bar date (Section 202(c)(1)-(3)). If a contractor fails to comply with any one of the obligations, the Federal Government may receive title to the patent. Even without actual ownership in an invention, the Federal Government agency that allocated the federal funds receives a non-exclusive, irrevocable, paid-up license to practice the invention and the ability to grant a licence to a third party under certain circumstances where the contractor fails to take "steps to achieve practical application" of the invention.

All of this matters because some of Stanford's research related to the HIV measurement techniques were funded by the National institute of Health (NIH) and thus the invention at issue is subject to the Bayh-Dole Act. Under the Act, Stanford argues that irrespective of the status of the assignment agreements with Holodniy the Act operates to enable the Government to become a non-exclusive licensee of the patented procedure with Stanford retaining title to the invention. Such operation, would therefore trump a later assignment between the inventor and a third-party, like Roche.

The Question

Does the Bayh-Dole Act displace the norm that the rights in an invention first belong to the inventor and, instead, automatically vest title to federally funded inventions in federal contractors?

The Supreme Court's Answer

No - 7 to 2 with Justice Breyer and Justice Ginsburg dissenting.

For discussion on the Court's opinion click here for Part II.