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Supreme Court Rules for Roche, Clarifies Bayh-Dole

This article has been updated with additional comments from the Supreme Court decision and a legal expert.

By Matt Jones

NEW YORK (GenomeWeb News) –In a ruling that may lead federally-funded research universities to clarify their intellectual property agreements with their employees, the US Supreme Court ruled today that Stanford University does not have a claim to PCR technology-related patents that it said Roche Molecular Systems has infringed.

The decision will serve to clarify the domain of the 1980 Bayh-Dole Act and will mean that going forward it is likely that universities seeking to retain rights to patents from their employees will need to have an agreement that assigns the school those rights.

In a 7 to 2 decision, the court sided with Roche, saying that just because university-based research may been funded by federal dollars it does not override more than 200 years of patent law and take away the rights to a patent from its inventor, as Stanford had argued.

Stanford said in a statement Monday that it is disappointed with the ruling, and that it could cost the federal government in many ways in the future by undercutting its rights to federally funded research.

In the 2005 lawsuit, which Stanford said could have "a significant impact on research universities across the country," the university claimed that Roche has been infringing three patents and said that it filed the suit only after years of attempting to get the company to license the IP.

The most likely effect of the ruling will be that universities will begin making sure that their employees sign assignation agreements that make it clear if they expect to own the rights to the patents their employees generate, Steve Chang, an attorney with the IP firm Banner and Witcoff, told GenomeWeb Daily News Monday.

Stanford has claimed that one of its AIDS researchers, Professor Mark Holodniy, developed the patented process with federal funding and that while collaborating with a company called Cetus, which was developing PCR technology and later sold those assets to Roche, he gave away the rights to the patents resulting from the collaboration.

The Supreme Court decision also waves off the position held by the Obama Administration, which took Stanford's side, and had argued in a brief that the Bayh-Dole Act gives a federally-funded contractor rights to IP over that of the inventor.

"The funds at issue are substantial: the federal government spends billions of dollars per year on science and technology research at United States colleges and universities, small businesses, and nonprofit organizations," the Obama Administration said in its brief.

"By upending the Bayh-Dole Act's hierarchy of rights, the court of appeals necessarily made the government's rights, like the contractor's rights, depend on the actions of an individual inventor," the administration had argued.

The Bayh-Dole Act was passed in part to support the transfer of new technologies from universities and into new businesses and innovations, but also to keep the US taxpayer from paying for the same research twice – once through the grant and again when paying for the intellectual property.

Today's ruling upholds that of a 2009 judgment by the US Court of Appeals for the Federal Circuit, which agreed with Roche that it owned the rights to all the patents because Holodniy had only an uncertain, future-looking agreement with Stanford, which gave precedent to the more definitive agreement he signed with Cetus.

The university said that it agreed with the dissenting opinion in the case, written by Justice Stephen Breyer, and said that the ruling would allow individual inventors at universities or small businesses to assign an invention that was produced by public funds away to a third party.

Stanford said that decision could have "many potential negative consequences for the federal government, which retains certain rights to inventions created with federal funding, for universities and others who create inventions with that funding, and for companies that license the inventions."

"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," Chief Justice John Roberts wrote in his decision. "Under the law in its current form, "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter . . . may obtain a patent therefor."

"Our precedents confirm the general rule that rights in an invention belong to the inventor," explained Roberts, who added that it "is equally well established that an inventor can assign his rights in an invention to a third party."

Roberts wrote that Bayh-Dole was not meant to overturn "one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions.

"We are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly," he continued.

As the majority opinion noted, Chang said, "A lot of universities are already in the practice of getting separate assignments from their inventors, so I would imagine that making this a formal requirement would not be too difficult."

The Supreme Court opinion also pointed out that the National Institutes of Health, which funded the research involved in this case, makes clear in their guidances to contractors that "an inventor has ownership of an invention" and that contractors should have in place "employee agreements requiring an inventor to 'assign' or give ownership of an invention to the organization upon acceptance of federal funds."

Chang suggested that more emphasis and vigilance in requiring these agreements is the most likely outcome of this ruling.

A central problem for Stanford in this case is that when Holodniy went to work in partnership with Cetus he signed a specific agreement with language stating "I do hereby assign" rights to patents developed out of the collaboration to the company.

"If the Stanford agreement had had that language then this case probably would have flipped," Chang said.

Stanford had an earlier agreement with Holodniy, but it said "I agree to assign" future patents to Stanford; agreeing to do assign something is different than actually assigning it.

"The take-away for the universities is that that could happen regardless of whether your project was under Bayh-Dole. It's just making sure that your employees don't sign anything without having them fully vetted by the legal department," Chang said.

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