Today, the Supreme Court announced its decision in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. (No. 09-1159) involving the rights of parties to inventions under the Bayh-Dole Act (also known as the University and Small Business Patent Procedures Act of 1980, 35 U.S.C. § 200 et seq.). Chief Justice Roberts wrote the decision for a 7-2 court, in which the Court confirmed that invention rights are held by individuals and held that the Bayh-Dole Act does not by itself automatically void ab initio an inventor’s rights in government-funded inventions. Justice Sotomayor concurred and Justices Breyer and Ginsburg dissented.
The Court first traced the history of the Bayh-Dole Act. “The Bayh-Dole Act applies 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.’” The Court stated that “The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.” Contractors in this context means the university or agency receiving federal funding, not the employees of such entities. “Only when an invention belongs to the contractor does the Bayh-Dole Act come into play. The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.” The Court clarified that a university would not obtain title to an employee’s invention simply because some amount of federal funding was used during conception or reduction to practice. Rather, the contractor must first obtain the rights to the invention from its employee, which should be standard practice.
The Court affirmed the Federal Circuits decision finding that Stanford University lacked standing to sue Roche for patent infringement because the researcher in question (Dr. Mark Holodniy) had assigned his rights to Cetus, which Roche later acquired, and the Bayh-Dole Act did not give Stanford University the right to trump that assignment. By only obtaining an agreement from Dr. Holodniy to assign his rights, rather than an actual assignment, Stanford could not use the Bayh-Dole Act to trump that assignment.
One of the key insights to glean from this decision may involve an issue that the Court expressly declined to consider. As stated above, when Dr. Holodniy began working with Stanford University, he agreed to assign his rights in any inventions made using Stanford’s funding to the University. He did not actually assign the rights to the University, however. Instead, he assigned them later to Cetus. The Federal Circuit, based on its precedent in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991), determined that the language in his agreement with Stanford (“agree to assign,” rather than “do hereby assign”) was only a promise to assign rights in the future and did not act as an actual assignment of these rights. This particular issue was not appealed by Stanford, so it was not addressed in the briefs or explicitly considered by the Court. In his dissent, however, Justice Breyer strongly indicated that this rule is questionable, at best, and suggested that the Court remand for the Federal Circuit to consider this rule more carefully. Justice Breyer’s dissent suggests that the Court will be taking this question up in the future. For now, though, practitioners should carefully consider employee or contractor assignment provisions to make sure that they are drafted so as to assign the rights immediately, and not act simply as a promise to assign them later.