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Blog Home | September 30, 2014

United States Supreme Court Limits Ability of U.S. Research Universities to Secure Patent Rights

On June 6, 2011, the U.S. Supreme Court ruled in Board of Trustees of Stanford University v. Roche Molecular Systems that rights to patents developed under federal research grants are not automatically given to universities.  The case had been closely followed within the biotechnology community given the hundreds of billions of dollars generated by discoveries that originate in U.S. research universities.  The Court’s ruling marks a defeat to Stanford University and other research universities bidding for full patent rights, and is a victory for companies that fund research universities.  Intel Corp., Eli Lilly & Co., Johnson & Johnson, and Pfizer Inc. were among the companies that supported Roche.

The case involved patents for technology that were used to measure human immunodeficiency virus (HIV) in blood samples.  The technology for measuring these samples was developed by Stanford scientists who were funded by the National Institutes of Health.  Stanford researchers had worked with a private company on such a technique, which ultimately led to a test kit marketed by Roche Molecular Systems, the world’s largest maker of cancer drugs.  Along with forty other universities and the American Council on Education, the University of Colorado submitted an amicus brief to the Court in support of Stanford in the case, a ruling which will greatly impact universities that own patents resulting from federally funded research.
The issue involved the interpretation of the University and Small Business Patent Procedures Act, also known as the Bayh-Dole Act of 1980.  The Bayh-Dole Act gives U.S. universities, small businesses and nonprofit groups rights to inventions and other intellectual property resulting from federally funded research.

Stanford filed suit for patent infringement over three patents against Roche Molecular Systems in 2005.  The university alleged that the HIV test kits sold by Roche emerged from research conducted by Dr. Mark Holodniy when he was at Stanford in the late 1980s.  While at Stanford, Dr. Holodniy signed an agreement giving the university “right, title and interest in” inventions stemming from his research.  During that time period, however, Dr. Holodniy worked at a private California biotechnology company called Cetus, which was later bought by Roche, to develop a blood testing system.  While at Cetus, Dr. Holodniy signed a contract agreeing to assign to Cetus the rights to his “ideas, inventions and improvements,” as a consequence of his access to the company’s polymerase chain reaction (PCR) – a method that allows billions of DNA sequences to be copied from a small blood sample – techniques, a technique that Cetus developed in the 1980′s.  Through Dr. Holodniy’s research, Stanford secured three patents to the blood-quantifying techniques.

The Supreme Court ruled 7-2 in favor of Roche Molecular Systems.  The Court held that Dr. Holodniy transferred his rights to the discoveries to Cetus, which made Roche the owner of the patents upon acquiring Cetus.  The Supreme Court ruled that inventors, rather than the universities that employ them, have the first right to patent and profit from their discoveries.  Thus, the majority held that Stanford interpreted the Bayh-Dole Act too broadly, stating that “nowhere in the Act are inventors deprived of their interest in federally funded inventions.”

According to Chief Justice John G. Roberts Jr., writer for the majority opinion, “since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor . . . 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 Roberts added that “we are confident that if Congress had intended such a sea change in intellectual property rights it would have said so clearly.”  In other words, Chief Justice Roberts held that the Bayh-Dole Act allows federal contractors, including universities, to elect to retain title to discoveries; the Act does not vest title automatically in universities.  Justices Stephen G. Breyer and Ruth Bader Ginsburg dissented, stating that the 1980 law intended to give federal contractors title to discoveries that arise from related research.

Although the Supreme Court’s decision clarifies the Bayh-Dole Act of 1980, some lawyers are skeptical as to its effects because the case arose under unusual circumstances; Dr. Holodniy signed two conflicting contracts.  In one contract, he promised Stanford the rights to his future inventions.  In the other contract, he assigned his rights to Cetus.  The Supreme Court ruled that Cetus’ contract prevailed because it covered current work, whereas Stanford’s contract applied only to future inventions.  Thus, the outcome of the case may, therefore, rest on the loose wording in the contracts.

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