Stanford v. Roche: Mind Your Assignments

Published August 4th, 2011

          A recent decision released by the U.S. Supreme Court, Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., has highlighted the importance of having properly executed assignments and employment agreements in place to protect intellectual property rights.

        Mark Holodniy was an inventor named on three U.S. patents.  It is well-accepted U.S. patent law that, absent any agreement to the contrary, the rights to these three patents would lie with Holodniy and the other inventors.  However, Holodniy was a research scientist at Stanford University and had previously signed a Copyright and Patent Agreement (CPA) stating that “I agree to assign or confirm in writing to Stanford … that right, title, and interest in and to … such inventions as required by Contracts or Grants”. 

        During his employment at Standford, Holodniy conducted some research at Cetus in order to learn new research techniques.  Cetus required Holodniy to sign a Visitor’s Confidentiality Agreement (VCA) as a condition of him using their facilities.  This agreement stated that “I will assign and hereby do assign to CETUS my right, title, and interest” in any inventions conceived “as a consequence of my access to CETUS’ facilities or information”. 

        Additionally, Holodniy’s research at Stanford University was supported by a U.S. government-funded grant awarded to Stanford.  The Bayh-Dole Act states that a grant recipient may “retain title to any subject invention” as long as certain conditions are met.  When, over the next several years, Stanford filed patent applications and had patents issued directed to the research techniques that Holodniy developed in part through his work at Cetus, Stanford notified the government that they wished to retain the rights to these inventions.  At about this time, Stanford also obtained proper assignments from Holodniy, assigning his rights in these inventions to Stanford.

        In the meantime, Cetus was acquired by Roche and Roche began commercializing the research techniques that Holodniy had worked on during his time at Cetus.  Stanford filed suit against Roche, alleging infringement of the three patents of which Holodniy was a named inventor.  In defense, Roche alleged that they were in fact co-owners of the three patents by virtue of the VCA signed by Holodniy when he worked at Cetus.  Roche asserted that they could not infringe patents that they co-own.

          Stanford argued that Holodniy did not have the right to assign these three patents to Cetus, by virtue of the CPA and assignment he had signed at Stanford and in view of the Bayh-Dole Act.  It was the job of the Supreme Court to determine which of these four transfers of rights should stand: Bayh-Dole Act, the CPA to Stanford, the VCA to Cetus (Roche), or the subsequent assignment to Stanford.

          The Supreme Court interpreted the Bayh-Dole Act and decided that this Act could not trump an inventor’s rights to an invention and, without an assignment or agreement to the contrary, the rights would remain with the inventor: “The Bayh-Dole Act does not confer title to federally funded inventions on contractors [e.g., Stanford] or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.”  Therefore, the Bayh-Dole Act would only allow Stanford to retain the rights to inventions that had been previously assigned to them.

          Stanford then relied on the CPA Holodniy had signed.  The Supreme Court decided, based on previous case law, that the “agree to assign” language was “a mere promise to assign rights in the future, not an immediate transfer of expectant interests.”  In other words, the CPA signed by Holodniy at Stanford was not an actual assignment but an indication that Holodniy would assign his interest in the future.

        In contrast to the CPA signed at Stanford, the VCA signed at Cetus had “do hereby assign” language, which was deemed to be “a present assignment of . . . future inventions.”  Thus, the VCA signed by Holodniy at Cetus was considered a present assignment of his future interest.  When Roche acquired Cetus, they likewise acquired this assignment.

        When Holodniy later assigned his rights to Stanford, it was too late.  The Supreme Court deemed that he had already assigned his rights to Cetus and had no rights left to assign to Stanford.  Consequently, Roche was indeed found to be a co-owner of the three Holodniy patents and Stanford had no grounds on which to sue Roche for infringement.

        This decision emphasizes that, in the absence to any agreement to the contrary, intellectual property rights lie with the inventor(s).  This decision should serve as a reminder of the importance of carefully drafted assignments and employment agreements and the intellectual property risks assumed with collaborative efforts.  In this case, the inventor assigned his rights to a third party without the consent or knowledge of his employer.