Stanford v. Roche and Ownership of Federally Funded Research: Navigating the Vagaries of Contract Law


Mary Hess Eliason, an Associate with Birch Stewart Kolasch and Birch, sent in this article discussing the recent Supreme Court decision of Stanford v. Roche .  The article highlights key points in both Chief Justice Roberts’ majority opinion and Justice Breyer’s dissent and questions whether this case presented the appropriate fact situation to address the issues at hand.

When an invention is conceived, it is generally presumed to be owned by the inventor under U.S. patent law.[1] The Supreme Court Opinion of Stanford v. Roche reinforces this maxim in the context of federally funded research.  The issue brought before the Supreme Court was, in the context of federally funded research, whether the ownership of the invention automatically arises with the federal contractor (i.e., Stanford) or with the inventor under the Bayh-Dole Act 35 U.S.C. §§ 200-212 and whether the inventor can interfere with any right of the federal contractor by assigning the invention to a third party.[2]

In their recent majority opinion, the Supreme Court decided that, based on contract law, an Inventor could assign an invention to a third party, even if the invention was federally funded under Bayh-Dole.

The facts of Stanford v. Roche boil down to two contracts.  In 1988, inventor Holodniy joined a laboratory at Stanford University as a research fellow.  Upon joining the laboratory, Holodniy signed an agreement stating “I agree to assign or confirm in writing to Stanford . . . right, title and interest in . . . such inventions as required by Contracts or Grants”.  Holodniy went to a local corporation, Cetus to develop the techniques which presumably resulted in at least part of the method used in the invention.[3] While there, Holodniy signed another agreement stating that he “will assign and do[es] hereby assign to Cetus, [his] right, title, and interest in each of the ideas, inventions and improvements” that he might devise “as a consequence of” his work at Cetus.

At least some of the work Holodniy performed for Stanford was under federally provided funds from National Institutes of Health (NIH).

Stanford eventually filed patent applications directed to the diagnostic methods relating to HIV, and obtained patents based on those applications.  Roche eventually acquired Cetus’ interests in the HIV diagnostics.  Relying on their patents, Stanford sued Roche for infringing the diagnostic method by selling a detection kit for HIV.

The Federal Circuit ruled that the first agreement Holodniy signed was not a present assignment of rights, and thus Roche was an owner of the invention in the disputed patents.[4] Stanford appealed to the Supreme Court, which issued their opinion on June 6, 2011.

Chief Justice Roberts, writing for the majority, affirmed the Federal Circuit, relying on statutory interpretation of the Bayh-Dole Act to conclude that the Act did not include any automatic vesting provisions which would operate to place title to the invention in Stanford’s hands despite the Cetus contract.  In particular, the majority points out that other government agencies do have automatic vesting statutes, which unambiguously indicate “that inventions created pursuant to specified federal contracts become the property of” some other party.[5] The Court further addresses the admittedly murky language of the statute and concludes: “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.’”[6]

However, the Court was somewhat divided, and Justice Breyer in the dissent (joined by Justice Ginsburg) proposes two alternate interpretations which would place title solely in Stanford’s hands.  Preliminarily, Justice Breyer suggests that the Bayh-Dole act was intended to further the policy of promoting commercialization of inventions.[7]

Justice Breyer suggests that one interpretation of the present factual situation which would promote the commercialization of inventions would be to re-write contract law to make Stanford’s initial agreement with Holodniy a present assignment of rights.  Justice Breyer indicates that this would require overturning the Federal Circuit’s opinion in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991)(which allows for the present assignment of an invention which has not yet been made).  In support of overturning FilmTec, Justice Breyer points to the arbitrary nature of contract law, suggesting that practitioners must be sure to “copy[] the precise words blessed by the Federal Circuit” to ensure a valid assignment.[8] This argument has some merit, but appears to concede that Roche had an ownership interest in the invention based on current contract law alone.

I would suggest that instead of overturning valid precedent (which of course the Supreme Court can do), the majority was correct in allowing contract law to mature and evolve in its own time.

Justice Breyer’s second solution to the Bayh-Dole uncertainty would be to treat the Act as “ordinarily assuming, and thereby ordinarily requiring an assignment of patent rights by the federally funded employee to the federally funded employer.”[9] The effect of Justice Breyer’s suggestion appears to be equivalent to simply assuming that title vests in the federal contractor (i.e. Stanford), and is no different from the vesting statute argument discussed in the majority.

Ultimately, the majority opinion does not fundamentally change the law of contract or the interpretation of Bayh-Dole.  Perhaps this case did not present an appropriate fact situation.  However, it does highlight the statutory failings of Bayh-Dole, and re-emphasize the importance in due diligence in promptly obtaining assignments from inventors.  I would expect to see more controversies related to both Bayh-Dole and FilmTec-style contracts in the near future.


[1] See 35 U.S.C. § 101, “[w]hoever invents or discovers a new and useful [invention] may obtain a patent therefore,” 35 U.S.C. § 261, patent applications are “assignable in law by an instrument in writing,” see also 37 C.F.R. § 3.73(a) “The inventor is presumed to be the owner of a patent application, and any patent that may issue therefrom, unless there is an assignment.”

[2] The U.S. Supreme Court defines the issue in Bd. of Trustees of Leland Stanford Jr. University v. Roche Molecular Systems, No. 09-1159 (Supreme Court 2011) as “whether the University and Small Business Patent Procedures Act of 1990- commonly referred to as the Bayh-Dole Act- displaces [the norm that rights in an invention belong to the inventor] and automatically vests title to federally funded inventions in federal contractors.” June 6, 2011, Slip. Op. page 1.

[3] Compare Brief for Petitioners at 19, “each of the PCR steps of the assay Dr. Holodniy developed [at Cetus] was publically available at the time” with Brief for Respondents, pages 5-6 “[t]he district court ruled that the invention claimed in the patents-in-suit . . . was fully conceived while Holodniy was at Cetus”.

[4] Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 583 F.3d 832 (2010).

[5] Slip. Op., page 8.

[6] Slip. Op., page 14.

[7] Slip. Op., dissent page 4.

[8] Slip. Op., dissent page 8.

[9] Id.


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One Response to “Stanford v. Roche and Ownership of Federally Funded Research: Navigating the Vagaries of Contract Law”

  1. patent_litigation says:

    This case underscores the vast differences between copyright and patent law; particularly considering the federal-funding angle, I somewhat expected the Court to rule in favor of the employer. Anyway, this patent litigation should serve as a lesson (especially to universities) that it’s not always enough to reduce agreements to writing; you also have to make sure that such agreements are legally airtight.

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