Protecting Title to Institutional Patents
Arising from Federal Funding
Doug Hallward
Hallward-Driemeier
Driemeier & Jim Myers
November 2010
ROPES & GRAY LLP
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ROPES & GRAY
Topics
p
• Interplay of Bayh-Dole and the Federal Circuit’s
St f d v. Roche
Stanford
R h Decision
D i i
– Federal Circuit undermined universities’ Bayh-Dole rights.
• Supreme Court Developments in the Case
– Stanford and the university community, with the help of
Ropes & Gray, obtained Supreme Court review.
• Steps to Take Now to Protect Institutional Ownership
of Federally Funded Inventions
– No easy answers.
– Monitor researcher activities and contracts.
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I. Introduction: Bayh-Dole and
St f d v. Roche
Stanford
R h
• Over half of university research is federally funded.
• Prior to 1980, there was no uniform treatment of title to
federally funded inventions.
• Government generally received title absent waiver
waiver.
– “Vesting” statutes
• Title “vested” in government unless it waived ownership.
• Superseded general rule that an inventor owns his or her inventions
inventions.
– FilmTec Corp. v. Hydranautics, 982 F.2d 1546 (Fed. Cir. 1992) (under pre-BayhDole statute title to federally funded inventions “automatically vested in the United
States” by “operation of law,” and therefore an inventor “had no right to assign it”).
• Problem: lengthy and confusing waiver procedures; government did
not commercialize inventions it owned.
– Institutional Patent Agreements
• U
Used
db
by some agencies
i tto give
i universities
i
iti a “fi
“firstt option”
ti ” tto own.
• Problem: dependent on universities obtaining inventor’s agreement
to assign.
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The Bayh-Dole
y
Act
•
•
Enacted in 1980 out of concern for declining technological innovation.
Sought to spur innovation by establishing uniform treatment of
federally funded inventions and giving universities certain ownership.
– Recognized universities would be highly effective at tech transfer.
•
K provisions:
Key
i i
– Universities, other non-profits, and small businesses have right to elect
title. § 202(a).
– University’s
y right
g is subject
j
to important
p
g
government rights
g
designed
g
to
serve the public interest. §§ 202(c), 203, 204.
•
•
•
•
March-in rights
Right to restrict or eliminate university's title in “exceptional circumstances”
Right to insist upon domestic manufacture
Royalty-free license
– Inventor’s rights are contingent and limited.
• Inventor can obtain title only if (1) university does not exercise its superior right to take
title and (2) the federal funding agency affirmatively grants an inventor’s request.
• Even if inventor obtains title,
title his or her rights are subject to government rights designed
to protect the public interest. § 202(d), 37 C.F.R. §§ 401.9, 401.14.
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Stanford v. Roche
• The facts:
– Stanford University sued Roche Molecular Systems for infringing
patents related to anti-HIV treatment.
– Stanford had developed the invention using federal funds.
– (i) When inventor began at Stanford, “agree[d] to assign” IP to Stanford;
(ii) while visiting at Cetus/Roche, inventor signed visitor confidentiality
agreement in which inventor did “hereby assign” resulting IP rights to
Roche; (iii) after returning to Stanford and conceiving invention, inventor
executed
t d assignment
i
t to
t Stanford.
St f d
• The arguments:
– Roche sought dismissal on ground that inventor assigned ownership to
Roche and therefore Stanford lacked standing to sue
sue.
– Stanford claimed full ownership under Bayh-Dole since invention was
federally funded and Stanford elected title.
• District Court upheld Stanford’s
Stanford s standing
standing.
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Federal Circuit’s Stanford Decision
• Reversed District Court’s
Court s judgment that Bayh
Bayh-Dole
Dole gave full
ownership to Stanford.
• Held that inventor’s “agree[ment] to assign” invention to
Stanford was promise to make future assignment, but later
purported
t d assignment
i
t to
t Roche
R h was iimmediately
di t l effective.
ff ti
– Drew critical distinction between “hereby assign” and “agree to assign.”
• Ruled that Stanford’s election of title under Bayh-Dole was
i ff ti because
ineffective
b
iinventor
t already
l d assigned
i
d IP tto R
Roche.
h
• Reasoned that Bayh-Dole does not “void” an inventor’s
assignment to third parties of federally funded inventions.
– St
Stated
t d that
th t Bayh-Dole
B h D l merely
l ““regulate[s]
l t [ ] relationships
l ti
hi off smallll
business and nonprofit grantees with the Government, not between
grantees and the inventors who work for them.”
– Concluded that Bayh-Dole could not allocate rights between Stanford
and the government unless Stanford first received an assignment of
ownership from the inventor.
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Troubling Implications of Federal
Ci it’ Decision
Circuit’s
D i i
•
Undermines statutory goal of certainty of title in federally funded inventions.
– Universities charged with finding and analyzing every document in which a
researcher might have assigned rights to third parties.
– University can never be certain that its assignment agreement with inventor will
trump competing language assigning to third party.
– Su
Suit against
aga s inventor
e o cannot
ca o compensate
co pe sa e for
o loss
oss o
of Bayh-Dole
ay
o e rights.
g s
•
Lack of certainty of title will hamper development and commercialization.
– Universities’ collaboration with industry partners to commercialize inventions has
contributed billions to GDP and created hundreds of thousands of new jobs.
– Industry partners will hesitate to invest millions in developing basic scientific
inventions if universities cannot warrant certain title to Bayh-Dole inventions.
•
Compromises Bayh-Dole’s objective to implement consistent treatment of
federally funded inventions.
– Bayh
Bayh-Dole
Dole sought to implement a “single,
“single uniform policy
policy.””
– Now, ownership of federally funded inventions determined by language of visitor
agreements signed by faculty researchers.
•
Government’s rights under Bayh-Dole are equally subject to circumvention.
– Government’s rights and those of universities equally dependent on statute.
– If inventor can assign IP outside of statute, government’s rights can be defeated.
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ROPES & GRAY
II.Supreme
p
Court Developments
p
•
Stanford petitioned U.S. Supreme Court to hear the case.
•
Historically, a certiorari petition without a circuit split and without amicus support
has a 2% chance of being granted.
•
WARF filed amicus brief highlighting the need for immediate review; MIT filed
amicus brief emphasizing how Bayh-Dole
Bayh Dole has fueled the U.S.
U S economy.
economy
•
Ropes & Gray filed amicus brief on behalf of AAU and 49 other leading research
universities and university associations in support of Stanford.
– Brief highlighted federal government’s
government s interests in the case.
– Strategy to get Supreme Court to invite the U.S. to file a brief.
•
In June, Supreme Court invited the views of the U.S.
•
On behalf of Stanford as well as university and association amici,
amici Ropes & Gray
led a coordinated effort to persuade the Solicitor General to express support.
– Working with AAU and COGR on behalf of the university community, visited federal
funding agencies to apprise them of federal interests at stake.
– O
On behalf
b h lf off Stanford,
St f d mett with
ith Solicitor
S li it G
General’s
l’ office
ffi to
t persuade
d the
th U.S.
U S to
t file
fil a
brief recommending Supreme Court review.
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ROPES & GRAY
Amicus Brief Filed byy AAU et al.
• Argued
g
that ownership of federally
y funded inventions is
allocated according to Bayh-Dole, not side-agreements
between individual inventors and third parties.
– Contended that the text of Bayh
Bayh-Dole
Dole gives universities a right to
elect title, subject to certain government rights, while inventors’
rights are limited and contingent.
– Explained
p a ed that
t at Federal
ede a Circuit’s
C cu t s dec
decision
s o that
t at Stanford’s
Sta o d s
ownership depended on an assignment from the inventor could
not be squared with Bayh-Dole’s text and structure.
– Noted that Federal Circuit’s decision creates an unwarranted
discrepancy between treatment of non-profit and small business
inventions, which are governed by Bayh-Dole, and large
business inventions, which are governed by pre-Bayh-Dole
statutes
t t t that
th t do
d nott allow
ll
an inventor
i
t to
t freely
f l assign
i rights.
i ht
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ROPES & GRAY
Amicus Brief Filed by AAU et al.
(cont’d)
• Argued
g
that Federal Circuit’s decision undermines the clear
title that is central to Bayh-Dole.
– Pointed to legislative history showing that Congress passed
Bayh-Dole
y
to create certainty
y of title in order to incentivize
universities and industry partners to commercialize inventions.
– Demonstrated that innovation has blossomed under Bayh-Dole
regime,
g
, but Federal Circuit’s decision threatens that success byy
undermining clarity of title.
• Contended that Federal Circuit’s decision severely impairs
federal government interests,
interests not just universities
universities’ rights.
rights
– Agencies’ Bayh-Dole rights depend on universities’ rights.
– Neither universities nor government have adequate alternative
remedies
di tto compensate
t for
f loss
l
off Bayh-Dole
B h D l rights.
i ht
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ROPES & GRAY
Roche’s Arguments
g
• Contended that case is not an appropriate forum to decide
rights under Bayh-Dole.
– Stated that Stanford remains a co-owner of the patents, so
question of terminating
q
g university’s
y rights
g
is not implicated.
p
– Pointed to footnote in Federal Circuit decision purporting to leave
open the question of government rights.
– Noted lack of circuit split; claimed outcome is “fact-dependent”
fact-dependent
and that Bayh-Dole issues likely would not resolve the case.
• Argued that Federal Circuit’s decision is correct.
– Claimed that Bayh-Dole “nowhere alters an inventor’s basic
freedom to assign” rights to third parties.
– Contended that goals of Bayh-Dole would be advanced by giving
ownership interest to Roche.
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ROPES & GRAY
Solicitor General’s Brief
• In September,
p
, the U.S. filed a brief urging
g g the
Supreme Court to take the case and reverse the
Federal Circuit.
• Brief adopted arguments in AAU brief, other amicus
briefs, and certiorari petition that the Federal
Circuit’s
Circuit
s decision undermines government interests
interests.
• Supporting brief from U.S. raised the chances of
Supreme Court review and winning on the merits to
90% historically.
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ROPES & GRAY
Solicitor General’s Brief (cont’d)
(
)
• Argued
g
that the Federal Circuit misconstrued the Bayh-Dole
y
Act’s comprehensive framework for disposition of rights in
federally funded inventions.
– Explained
p
that Bayh-Dole
y
created a “statutoryy hierarchy
y of rights.”
g
– Hierarchy: Top priority given to universities and other contractors, next
priority to the government, and “lowest position” occupied by inventor.
• Contended that impairment of Bayh
Bayh-Dole
Dole rights is so
important that immediate Supreme Court review is warranted
despite no conflict among lower courts.
– Noted the Federal Circuit
Circuit’ss decision upsets universities’
universities settled
expectations of title, hindering commercialization.
– Maintained that the government’s statutory rights are jeopardized by the
g of the Federal Circuit’s decision.
logic
– Pointed out that billions of taxpayer dollars are at stake.
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ROPES & GRAY
Solicitor General’s Brief (cont’d)
(
)
• Rejected
j
Roche’s argument
g
that Stanford v. Roche is an
inappropriate case in which to decide Bayh-Dole rights.
– Noted the Federal Circuit “definitively resolved a pure question of
law” to the detriment of universities’ and the g
government’s Bayhy
Dole rights.
– Noted that Federal Circuit’s decision did not depend on
Stanford’s retention of some rights
g
in the invention.
– Explained that universities and government cannot protect
themselves by changing assignment clauses.
– Asserted that question of Bayh-Dole rights is sufficiently
important to decide even if issue may not ultimately determine
case’s outcome.
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ROPES & GRAY
Supreme
p
Court Grants Certiorari
• On Monday,
Monday November 1,
1 Supreme Court agreed to
hear the case.
Stanford’s merits brief due December 16.
6
• S
• Amicus briefs in support of Stanford due December
23.
• Oral argument likely in March.
• Decision likely
y by
y end of June.
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III. How to Protect Rights
g
Now
• No easy answers.
– Federal Circuit decision leaves universities without bullet-proof
solutions.
– Steps
S
can be taken to minimize impact.
•
•
•
•
Use “hereby assign” language in employment agreements.
Monitor closelyy researchers’ activities with outside firms.
Insist upon reviewing any researcher contracts before signed.
Before hiring researchers, require disclosure of any preexisting agreements.
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