The disposition of Intellectual Property under federally-funded research is always one of the more complicated issues to explain to a private sponsor who adamantly believes that they are entitled to own everything that your school creates under a sponsored project. Thankfully, the rights and obligations of non-profit and educational institutions are largely spelled out in the Bayh-Dole Act, which we discussed last November. As we noted then, the Supreme Court decision in Stanford v. Roche became a defining case for the research community, and one that had Universities on the edges of their seats with respect to the ramifications on their own daily activities. Coming up on the year anniversary of that 7-2 decision, we are still now evaluating how this decision fully affects those in the university arena.
The facts of the case are pretty simple — Stanford professor Mark Holodniy executed his employment contract in 1988 that included a clause whereby he “agree[d] to assign” his “right, title and interest” in inventions resulting from his work to the University, which included research under a federally-funded award. Subsequently, Dr. Holodniy performed a stint as a visiting researcher for a private company (Cetus, which was later bought out by Roche Molecular Systems), and in his agreement with Cetus he directly assigned his rights to any created IP to the company.
While at Cetus, Dr. Holodniy created an HIV testing process, which her further perfected upon his return to Stanford. Independently and in light of Dr. Holodniy’s work at their respective entities, Stanford applied for and received patents based on the process, and Roche commercialized kits that incorporated the process. Stanford subsequently filed suit against Roche claiming infringement of their patents under Bayh-Dole.
The main issue became whether rights under Bayh-Dole automatically vest upon creation of the technology, or whether they must be specifically perfected by assignment or similar agreement. Not surprisingly, everyone had their own opinions, and the case headed to the Supreme Court with a multitude of briefs supporting each side.
Ultimately, the Supreme Court ruled against Stanford, holding that Bayh-Dole does not automatically vest title to federally funded inventions in the inventor’s employer (the federal contractor). Under Section 202(a) of the Act, the contractor may “elect to retain title,” which the Court found to mean some specific action, or “election,” such as a direct assignment of rights. Consequently, a University invoking its Bayh-Dole rights must take a substantive step to insure that their rights are retained.
In the Stanford case, the decision largely focused on the language in Dr. Holodniy’s employment agreement with the University. Because he only “agree[d] to assign” and did not actually assign his rights, some concrete step was necessarily mandated by the wording to allow Stanford to claim ownership. Consequently, following the execution of the employment agreement but prior to Dr. Holodniy’s execution of Cetus’ Visitor’s Confidentiality Agreement, it was actually Dr. Holodniy himself who held ownership of anything he created. Once he signed the VCA, which specifically assigned his rights to Cetus (“I hereby assign. . .”), ownership immediately passed to Cetus.
The long-term effect of the Stanford decision is that contractors cannot be passive in their retention of rights that might arise under Bayh-Dole. Not surprisingly, this has caused non-profit and educational institutions to reevaluate their employee agreements. While, to some, “agrees to assign” and “hereby assigns” may appear to have the same substantive meaning, schools such as MIT have changed their language in light of the case to make sure that their rights are fully protected