Solicitor General Files Brief in Stanford v. Roche

On September 28, 2010, the Solicitor General (SG) filed a brief explaining the views of the United States in the pending appeal of Stanford v. Roche, 583 F.3d 832 (Fed. Cir. 2009) (PDF).  The SG’s brief argues strongly in Stanford’s favor, and urges the Supreme Court to grant Stanford’s petition for a writ of certiorari.  This post is focused on the SG’s brief.

Fact Summary

The ownership of three patents is in dispute.  All three patents share a common parent application and claim a method for quantifying Human Immunodeficiency Virus (HIV) in human blood samples using polymerase chain reaction (PCR).  In 1988, Holodniy, one of the listed inventors on the patents, began working at Stanford University as a Research Fellow.  Upon joining Stanford, Holodniy executed an agreement to assign future inventions to Stanford. Cetus is a biotechnology company that pioneered PCR techniques for medical diagnostics, and is the predecessor of Roche in this dispute.  In early 1989, Holodniy began conducting research at both Stanford and Cetus.  Before beginning his work with Cetus, Holodniy executed an assignment agreement to immediately assign all future inventions to Cetus.  In due course, Holodniy’s research with Cetus produced a PCR assay that could quantify HIV in humans, and Stanford filed the patent application that would become the parent application from which the patents-in-suit claim priority.  Because the HIV research at Stanford had been funded by National Institutes of Health (NIH), Stanford “formally notified the Government that it elected to retain title to the inventions under the Bayh-Dole Act” during prosecution of the patents-in-suit.  Stanford is the named assignee of all three patents-in-suit.  Upon failure to reach a licensing agreement with Roche on the PCR assay for HIV, Stanford filed suit in 2005 against Roche for infringement.  Roche answered and counterclaimed that Stanford lacked standing to bring suit because Roche “possesses ownership, licenses, and/or shop rights to the patents through Roche’s acquisition of Cetus’s PCR assets.”  Roche also answered that the asserted patent claims were invalid for obviousness.

Lower Courts’ Decisions

At the district court, among other ownership claims based on California Statutes of limitations and laches, Stanford argued in the alternative that the Bayh-Dole Act [1] (35 U.S.C. §§ 200-212) “negated” Holidniy’s assignment to Cetus, thus giving the Government and Stanford “the right to take complete title to the inventions as a “right of second refusal.”  The district court granted Stanford’s motion in part, holding that Roche’s ownership claims of the patents were barred by the Bayh-Dole Act.  The district court also found the asserted claims invalid for obviousness.  The Federal Circuit held that the Bayh-Dole Act does not “automatically void . . . prior contractual transfer of rights” to a third party by the Stanford inventor, whose research is (in part) federally funded and with Stanford as the grantee institution of such funding.  The Federal Circuit found that the inventor’s assignment of his invention to Cetus (the predecessor of Roche) was valid.  Therefore the inventor was subsequently left with nothing to assign to Stanford.  The Federal circuit emphasized in its opinion the consistency between Stanford and its own precedent, Central Admixture Pharmacy Services, Inc. v. Advanced Cardiac Solutions, 482 F.3d 1347 (Fed. Cir. 2007) (PDF), as well as with recent district court opinions such as Fenn v. Yale University, 393 F. Supp. 2d 133 (D. Conn. 2004). But if Stanford truly is a consistent application of established case law, why would so many universities be concerned with the Federal Circuit’s Stanford holding?  As one commentator pointed out, the Stanford decision is “hard to reconcile with Central Admixture [a Federal Circuit opinion] which basically said only the feds, not 3rd parties, can challenge the contractor’s title to ‘subject inventions’ arising under Bayh-Dole.  But that is exactly what Judge Linn’s opinion allows Roche to do.” Because the Federal Circuit held that Stanford lacked standing to sue, it vacated the invalidity judgment.

Solicitor General Brief

Stanford petitioned the Supreme Court for certiorari in March, 2010.  Soon after, Massachusetts Institute of Technology (MIT), Wisconsin Alumni Research Foundation (WARF), and around 50 other major universities and academic research organizations filed three amicus briefs in support of Stanford, arguing that the Federal Circuit’s decision renders the Bayh-Dole Act virtually irrelevant.  The amicus briefs filed in support of Stanford all urged the Supreme Court to consult the SG for the views of the United States.  On June 28, 2010, the Supreme Court invited the SG to file a brief.

The SG framed the question at issue as follows:

Whether an inventor who is employed by a contractor [Stanford] that elects to retain rights in an invention may defeat the contractor’s right to retain title under the Bayh-Dole Act by contractually assigning his putative rights in the invention to a third party [Roche].

First, the SG argues that the Federal Circuit “misconstrued the Bayh-Dole Act’s comprehensive framework for disposition of rights in federally funded inventions.”  The SG finds a “statutory hierarchy of rights” in Bayh-Dole.  Under this view, the inventor is last in line for ownership of inventions, behind Stanford University and the Federal Government.  Here, because Stanford elected to exercise its statutory ownership rights, the inventor is left without any ownership rights to his invention.  As to the argument that an inventor always has ab initio ownership right to his invention, given that a university researcher is not usually considered someone who is “employed to invent,” the SG pointed out that Bayh-Dole specifically states that “this chapter shall take precedence over any other Act which would require a disposition of rights in subject inventions  . . .  in a manner that is inconsistent with this chapter.”

Second, the SG noted the importance of resolving this question because “the amount of federal funding at issue is substantial,” and the Federal Circuit’s holding is at odds with the intent and goals of the Bayh-Dole act.  The Bayh-Dole Act was enacted to replace a “patchwork of varied statutory and agency approaches to ownership of federally funded inventions with a uniform and effective framework.”  The SG argues that the Federal Circuit’s decision “upsets those settled expectations.”  The SG added that the Federal Circuit’s decision “calls into question the government’s ability to manage federally funded inventions for the benefit of the public.”

Finally, the SG pointed out that “this case is an appropriate vehicle for resolving the question represented.”  The question at issue is purely a matter of law.  And the SG argues that contractors (i.e. universities) and the government cannot terminate the damage by simply “modifying their assignment agreement clauses in future contracts” because a “massive number of past and present agreements” over the 30 years of Bayh-Dole rely on an understanding of Bayh-Dole that is contrary to the Federal Circuit’s holding.

Regarding this last point, there have been very few cases over the last thirty years that center on the Bayh-Dole Act’s implication in inventor ownership disputes.  The possibility of a flood of new litigation stemming from the Federal Circuit’s holding in Stanford seems remote.  Additionally, the Bayh-Dole argument in Stanford v. Roche is only one of several alternative arguments in the dispute.  Roche pointed out in its opposition brief for the Supreme Court that “the question presented will not be outcome-determinative,” as Roche could likely prevail on other grounds, including the district court’s judgment of invalidity of the asserted claims.


[1] The University and Small Business Patent Procedure Act of 1980 (commonly known as the Bayh-Dole Act) promulgates a uniform set of procedures allowing federal research funding grantees such as universities to acquire ownership of inventions developed using federal funds.  Previously, federally funded inventions by default belonged to the federally government, and different federal funding agencies had differing procedures for allowing grantees to take ownership of inventions.  Prior to Bayh-Dole, few grantees gained ownership of their federally funded inventions, and most federally owned inventions (patents) languished in a vast bureaucracy without being put into economic use (i.e. not generating licensing fees or royalties).