On Monday, June 6, 2011, the Supreme Court held that the Bayh-Dole Act does not disturb the long-standing rule of patent law that ownership of patent rights vest in the inventor. In Bd. of Trs. of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc.,the Supreme Court affirmed the Federal Circuit’s ruling and held that the Bayh-Dole Act clarified “the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.” (Slip. Op. at 12). For the contractor to have rights in a patent, the inventor must have executed a valid assignment in favor of the contractor. 

The Stanford case arose from a joint research program in which a Stanford researcher conducted HIV-related research at Cetus Corp. Roche is the successor of Cetus. The researcher had “agree[d] to assign” any inventions to Stanford, and later did execute an assignment to Stanford for the specific patents. However, in the interim, the researcher signed a confidentiality agreement that provided he “will assign and do[es] hereby assign” to Cetus inventions arising out of the use of Cetus’s facilities. Following its precedent, the Federal Circuit ruled that the language in Stanford’s agreement to assign did not actually effect an assignment whereas the language of the assignment to Cetus did. Accordingly, Roche was the owner of the invention unless the Bayh-Dole Act vested ownership in Stanford. The Federal Circuit held it did not. (See our previous alert for a more detailed history.)

In affirming, the Supreme Court characterized the concept that the inventor owns the patent rights as basic to our patent laws since the passage of the first Patent Act in 1790. It found that Congress has divested inventors of this right in the past only by unambiguous language. It cited two instances, inventions concerning nuclear material or atomic energy and inventions made pursuant to contracts with NASA, where Congress unambiguously specified that the title would vest in the government. The Court observed that the language that divested the inventor’s rights in those instances was notably absent from the Bayh-Dole Act. Further, the Supreme Court found other language in the Bayh-Dole Act supported its view. 

Justice Sotomayor wrote a concurring opinion to make clear that she did not view the majority opinion as resolving whether the Federal Circuit’s precedent was correct in interpreting Stanford’s agreement to assign as not actually effecting an assignment, particularly where the Bayh-Dole Act is implicated. Since Stanford did not challenge the Federal Circuit’s decision on that ground, she nonetheless agreed affirmance was appropriate. 

Justice Breyer, joined by Justice Ginsburg, dissented. The dissent would have vacated and remanded the case because in their view, the answer to the question presented turned on matters on which the parties had not had a full opportunity to argue. One such matter was the Federal Circuit’s precedent on the interpretation of assignment agreements. The dissent did not view the majority opinion as foreclosing argument on this point by similarly situated parties in the future. The second matter not fully addressed was whether the Bayh-Dole Act should be interpreted to create a presumption of assignment by federally funded employees. While the concurring and dissenting Justices made clear their view that the Federal Circuit’s case law regarding the proper construction of agreements to assign remains open to challenge, the Federal Circuit’s precedent will remain controlling unless overruled by that court en banc or by the Supreme Court. Both are unlikely. 

Thus, the first and best line of protection for academic and research institutions as well as private recipients of federal research dollars is the same as for other employers: review with competent counsel your policies and practices regarding assignments of inventions and the forms and agreements used in connection with such assignments and with agreements to assign. These must be drafted with the understanding that ownership initially vests with the inventor or, where more than one person contributes to the conception of the invention, with the inventors jointly.