Stanford v. Roche Molecular Systems, Inc., 563 U.S. — (2011), the Supreme Court, in its second patent case in a week, held that the Bayh-Dole Act does not automatically vest title to federally-funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions.   In a case widely discussed at the time, the Federal Circuit below held that inventor Dr. Holodniy’s research agreement with Cetus that automatically assigned inventions to Cetus trumped his prior agreement with Stanford, where he merely agreed to assign future inventions to Stanford.  Thus, Roche Molecular Systems, Cetus’ successor, was able to defend Stanford’s infringement claim with an assertion of co-ownership. 

Before the Supreme Court, Stanford focused on §202(a) of the Bayh-Dole Act, which allows federally funded researchers to elect to retain title to any “subject invention.” Stanford argued that §202(a) gave it title to Dr. Holodniy’s invention as a matter of federal law, his agreement with Cetus notwithstanding.

The Supreme Court noted that its precedents confirm the general rule that rights in an invention belong to the inventor.  The Court noted that “nowhere in the Act is title expressly vested in contractors or anyone else” and that “nowhere in the Act are inventors expressly deprived of their interest in federally funded inventions.” The Court found Stanford’s argument that the language “any invention of the contractor” must include all inventions made by its employees “plausible enough in the abstract,” but rejected it, noting that this construction made the language “of the contractor” superfluous and was contrary to precedent that mere employment is insufficient to vest title to an employee’s invention in the employer.  The Supreme Court also pointed out that an election to “retain” title is not the same as to “acquire” or “receive” title, noting that “[y]ou cannot retain something unless you already have it.”  The Court was “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.’”

Justice Sotomayor’s concurrence and Justices Breyer’s and Ginsberg’s dissent focused on the Federal Circuit’s holding that the earlier Stanford agreement’s use of the words “agree to assign,” was trumped by the later Cetus agreement’s use of the words “do hereby assign.”  Relying on FilmTec Corp. v. Allied-Signal, Inc., 939 F. 2d 1568 (Fed. Cir. 1991), the Federal Circuit reasoned that once the invention was made it was automatically transferred to Cetus, leaving nothing for Dr. Holodniy to transfer to Stanford.  The dissenters found that this made “too much of too little.”  Citing a treatise and a law review article, they suggested that both agreements merely gave rise to equitable interests, and the fact that Stanford’s was first suggested it should own the rights.  The dissent criticized the Film Tech decision for providing no explanation for what seems a significant change in the law, noting that it set up a technical drafting trap for the unwary.

What this means for Government Contractors – the Bayh-Dole Act does not independently transfer title to inventions from the inventor to the contractor, and thus contractors need to continue to take steps to secure ownership of inventions from their employees.

What this means for all employers – The Federal Circuit’s rule that a current assignment trumps a mere agreement to assign in the future remains intact, but has been criticized.  The prudent employer will require both an agreement to assign and a present assignment (e.g., I agree to assign, and hereby do assign, all INVENTIONS to Employer”).