Bayh-Dole Act Does not Automatically Vest Ownership of Federally Funded Inventions in US Government Contractors, Says US Supreme Court

On June 6, 2011, the Supreme Court of the United States held that the University and Small Business Patent Procedures Act of 1980 (the “Bayh-Dole Act” or the “Act”) does not automatically grant federal government contractors ownership over inventions created in the course of work funded by the U.S. government. Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, Inc., No. 09-1159 (Jun. 6, 2011). The Court held that although the Act gives such contractors the ability to claim ownership of such inventions, it does not displace the longstanding principle that, unless agreed to the contrary, title to an invention belongs in the first instance to the individual inventor or inventors. In order for the inventor’s employer to acquire title to the invention, the inventor must expressly assign his interest to the employer.

In the case before the Court, Dr. Mark Holodniy, an employee of Stanford University, was working to develop a test to measure the quantify human immunodeficiency virus (“HIV”) in blood based on polymerase chain reaction technology.  The research was funded in part by the U.S. government. In the course of his work, Holodniy spent a period of approximately nine months at Cetus Corp., a California company that was also engaged in AIDS research. As a condition of his gaining access to Cetus, Holodniy signed a confidentiality agreement that contained a provision assigning to Cetus all inventions and improvements made as a consequence of his access to Cetus.

Holodniy returned to Stanford, and only later did the university obtain an assignment from him of his rights relating to HIV measurement techniques. As a consequence of the work of Holodniy and other of the university employees, Stanford obtained three patents covering HIV measurement processes. The university granted the U.S. government a nonexclusive license to use the patented procedure and formally notified the government that it elected to retain title to the invention.

Roche Molecular Systems acquired Cetus’s assets relating to HIV research and eventually released an HIV test kit based upon Cetus’s work. Stanford sued Roche, claiming that the kits infringed its HIV measurement patents. Roche asserted that it was a co-owner of the HIV quantification procedure based on Holodniy’s assignment of his rights in the confidentiality agreement.  Stanford argued that under the Bayh-Dole Act, Holodniy’s rights as an inventor were automatically assigned to Stanford, thereby depriving Holodniy of the ability to assign any rights to Cetus.

The U.S. district court agreed with Stanford, but the U.S. Court of Appeals for the Federal Circuit reversed. The university petitioned the Supreme Court for a writ of certiorari, which the Court granted.

The Bayh-Dole Act allocates between the federal government and federal contractors rights in “subject inventions,” which the Act defines as “any invention of the contractor conceived of first actually reduced to practice in the performance of work under a funding agreement.” Section 202(a) of the Act provides that such contractors may “elect to retain title to any subject invention.”

On behalf of a 7-2 majority, Chief Justice John Roberts wrote that,

Since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor. The question here is whether the University and Small Business Patent Procedures Act of 1980—commonly referred to as the Bayh-Dole Act—displaces that norm and automatically vests title to federally funded inventions in federal contractors. We hold that it does not.

The Court continued–

Nowhere in the 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 contractors may elect to retain title to any subject invention….

It would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising. 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.”

Accordingly, the Supreme Court affirmed the Federal Circuit’s judgment directing the district court to dismiss Stanford’s infringement claim.

The Court’s opinion underlines the importance of ensuring that employers obtain full, enforceable assignments of rights to their employees’ inventions.

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