Court rules against Stanford in patent case

Ruling has wide consequences for federally sponsored research, lawyer says

Monday's U.S. Supreme Court ruling in a patent ownership case is a blow to federally sponsored research in universities, according to Stanford University Stanford General Counsel Debra Zumwalt.

The case, Stanford University v. Roche Molecular Systems -- in which the court ruled in favor of Roche -- could have wide impact on the ownership of rights to inventions stemming from federally funded research.

The court ruled that Roche is a co-owner with Stanford of patents for AIDS testing kits because a Stanford researcher signed a visitor confidentiality agreement that contained an assignment of patent rights when he was doing work at a company later acquired by Roche.

The court also said that because Stanford was a co-owner, it did not have standing to sue Roche for patent infringement.

Stanford had argued that assigning patent rights to Roche violates the Bayh-Dole Act, which vests patent rights from federally funded research in universities and not individual researchers.

"We are disappointed with the ruling by the Supreme Court in this case but will move forward to protect the interests of all parties in inventions created with federal funding, including the interests of the federal government and companies that license technology from Stanford," Zumwalt said.

Zumwalt said in a statement that Stanford University "respectfully disagrees" with the 7-2 decision interpreting the Bayh-Dole Act.

Chief Justice John Roberts wrote for the majority. Justice Stephen Breyer wrote in the dissenting opinion that the majority's ruling would allow an individual inventor at a university, nonprofit or small business to "assign an invention (produced by public funds) to a third party, thereby taking that invention out from under the Bayh-Dole Act's restrictions, conditions and allocation rules," and that is "inconsistent with the Act's basic purpose."

Both Stanford and the federal government argued that this result was not the intent of Bayh-Dole (as did Senator Bayh in his amicus brief) and has 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.

For example, Zumwalt said the federal government could lose its many rights in the inventions, could lose the assurance that the royalties that would have gone to the university are used to further scientific research and education, and could lose the requirement that exclusive licensees will manufacture any products substantially in the United States.

In a brief filed on behalf of Stanford, the Association of American Universities (AAU), joined by seven other research associations and five dozen universities, wrote that the Bayh-Dole Act has been "incredibly successful in stimulating innovation by giving universities certainty regarding their ownership of federally funded inventions."

"Universities helped bring to market 4,338 new products between 1998 and 2006, or more than one product a day," the AAU wrote, citing Google (Stanford), Internet Explorer (University of Illinois) and the fibromyalgia drug Lyrica (Northwestern University) as examples.

The Association of American Universities also wrote that the law had made an "extraordinary contribution" to the national economy by helping to form more than 6,500 new companies from inventions created under the act, an estimated contribution of $450 billion to the U.S. gross industrial output and the creation of 280,000 new high technology jobs between 1999 and 2007.

After years of unsuccessfully negotiating with Roche in an attempt to convince the company to acquire a license to Stanford's patents, Stanford sued Roche in 2005, alleging that its kits for detecting human immunodeficiency virus (HIV) infringed university patents.

A federal district court in San Francisco ruled that Stanford owned the patents under the Bayh-Dole Act, also known as the University and Small Business Patent Procedures Act.

A federal appeals court in Washington, D.C., disagreed, saying Stanford shared ownership of the patents with Roche under its interpretation of the Bayh-Dole Act.

The Obama administration has urged the Supreme Court to reverse the 2009 appeals court decision.

In a brief filed on behalf of Stanford, acting U.S. Solicitor General Neal Katyal said the decision creates "serious uncertainty" about title to patents, "frustrates the government's ability to protect the taxpayers' multibillion-dollar investments in research and development" and undermines efforts by Congress "to ensure that federally funded inventions are used to advance the public interest."

The case concerned ownership of three patents for monitoring the effectiveness of HIV treatments. Stanford scientists, including Mark Holodniy, a professor of medicine specializing in AIDS research, developed the patented process with federal funding. While a research fellow at Stanford, Holodniy visited Cetus Corp. (later acquired by Roche) to learn a research technique -- known as polymerase chain reaction, or PCR -- for producing millions of copies of a specific DNA sequence. (Cetus later sold that line of business to Roche.)

The patent dispute arose from the wording of two agreements Holodniy signed assigning invention rights: a 1988 copyright and patent agreement at Stanford (the SU-18) and a 1989 visitor's confidentiality agreement at Cetus.

— Palo Alto Weekly staff

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Like this comment
Posted by Dan
a resident of Southgate
on Jun 7, 2011 at 12:49 pm

Unbelievable. One researcher, casually signing a visitor agreement (probably without thoroughly reading it)can sign away patent rights owned not by him, but by a University and the Federal Government. This decision opens the door to drug companies asking even the lowliest researcher on the project to sign a seemingly innocuous form (with lots of small print legalese)and using that form to steal millions of dollars. For that matter, what's to keep a researcher from selling patent rights he doesn't even own? This is what it means to have a "business friendly" Supreme Court.

Like this comment
Posted by Who-Cares?
a resident of Another Palo Alto neighborhood
on Jun 7, 2011 at 1:12 pm

> Chief Justice John Roberts wrote for the majority. Justice Stephen
> Breyer wrote in the dissenting opinion that the majority's ruling
> would allow an individual inventor at a university, nonprofit or small
> business to "assign an invention (produced by public funds) to a third > party, thereby taking that invention out from under the Bayh-Dole
> Act's restrictions, conditions and allocation rules," and that is >"inconsistent with the Act's basic purpose."

This seems to be a common-sense review of the facts. Wonder why the Majority didn't see it that way?

Well .. whatever the reason, this is really a Stanford management problem. Clearly they need to insure that:

1) All copyright/patent issues are called out in employment contracts.
2) Demand that all NDAs (Non-disclosure Agreements) be reviewed by University Counsel prior to being signed.
3) Possibly require that Counsel counter-sign all NDAs.
4) Restrict all off-site research that involves signing NDAs.

and so on ..

Stanford is a multi-billion dollar operation. There is no excuse for sloppy management. Oh, and what happened to the researcher whose "John Hancock" started this whole affair? Was he counseled? Was he fired? Does he have anything to say about his decision to sign without consulting (at least) his/her manager?

All-in-all, this is not an issue that affects Palo Alto residents.

Like this comment
Posted by Kelly
a resident of Midtown
on Jun 7, 2011 at 3:50 pm

This is a sound decision by the Supreme Court. Publicly-funded research should be open to all Americans, including drug companies. Drug companies often agree to help out the public reserch community, for the obvious reason that both entities benefit from this relationship.

The case in question involved a public researcher who had a good idea about HIV testing, but he lacked a (patented) private methodology. He went to that private company to learn its methods, which was crucial to his research. A co-owner relationship was thus developed.

We, as a people, will greatly benefit from this 7-2 decision by the Supremes.

Like this comment
Posted by Steve
a resident of Professorville
on Jun 7, 2011 at 7:23 pm

Dan, if the researcher is doing work with both groups then the property belongs to both. If the researcher can't/ doesn't read the visitor confidentiality agreement then he shouldn't be trusted to sign anything.

Like this comment
Posted by 35USC101
a resident of Duveneck/St. Francis
on Jun 7, 2011 at 8:02 pm

Having actually read the case, I would like to point out that the Stanford researcher actually worked at Roche (Cetus) for 9 months.
Furthermore, the assignment to Roche was operative because the the invention was dependent on the materials provided by Roche (PCR was not a widespread technique at the time).

Stanford royally screwed up by having it researchers sign an agreement to assign future inventions, rather than a present assignment of future inventions. Stanford could have avoided the problem by using an intelligent lawyer.

As for Bayh-Dole, Roche and Stanford pulled a fast one over SCOTUS.
The US government has never (over 30 years) exploited its patent rights under Bayh-Dole. Neither Roche nor Stanford raised this point.
Universities cause much mischief by exclusively licensing government funded research. Harvard and Johns Hopkins are much better about non-exclusively licensing inventions than Stanford.

Like this comment
Posted by LDC
a resident of Palo Verde
on Jun 7, 2011 at 10:29 pm

'Who-Cares?' is amazingly ignorant of the many Stanford faculty and staff that are Palo Alto residents.

Like this comment
Posted by inventor
a resident of Another Palo Alto neighborhood
on Jun 8, 2011 at 9:06 pm

I don't know if this case is the way to fix things, but it would not work very well for a Stanford student, say, to graduate and not be able to work in his or her field without infringing on Stanford patents. In general, patents are too strong and too broad. The whole system needs massive reform.

Like this comment
Posted by Matt
a resident of Duveneck/St. Francis
on Jun 10, 2011 at 9:28 am

Those interested can read the actual opinion here:
Web Link

Indeed, it seems that Cetus did contribute significantly to the invention. In addition, the collaboration was longer term, and in fact arranged by the researcher's supervisor.

I'm not very familiar with the Bayh-Dole language, but I would have been surprised if it was intended to provide *exclusive* patent rights to the contractor even when a 3rd party is a co-inventor. I had thought that the intent was to allow patent rights to the contractor (Stanford in this case) so that said contractor would have an incentive to commercialize the technology. (The idea being that if the federal gov't retained the rights, there would effectively be no patent coverage, and thereby less incentive for someone to invest in commercialization.)

Sorry, but further commenting on this topic has been closed.

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