1. The Supreme Court Sets Limits on the Bayh-Dole Act Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. Kevin E. Noonan, Ph.D.

2. Outline of the Talk  Introduction: the case  Agreements with Stanford and Cetus  District court decision  Federal Circuit panel decision  The Supreme Court  Majority opinion  Dissent (Justices Breyer and Ginsberg)  Concurrence (Justice Sotomayor)  Significance  Unanswered questions

3. Outline of the Talk  Consequences and Recommendations  For universities  For researchers  For licensees and potential licensees  Policy concerns  Questions

4. Background  Technology: PCR detection of HIV infection  Stanford holds patents assigned by inventors  Roche sells diagnostic test relating to invention  Ownership issue  Inventor signed agreement with Stanford that he “will assign” inventions to the university  Some work performed at Cetus where inventor signed agreement that he “hereby assigns”  Roche asserted ownership interest in patent infringement lawsuit by Stanford

5. Background  Proceedings below  District court trial on the merits, denied Roche’s ownership claim  Federal Circuit vacated and remanded with instructions to dismiss, finding significant difference in language between two agreements

6. Background  Proceedings below  “Agreement to assign” is merely a promise to assign in the future while “do hereby assign” is a present assignment of a future invention  Relied on FilmTec v. Allied Signal, held that inventor had already assigned his rights to Cetus/Roche and thus had nothing to assign to Stanford

7. Supreme Court  What was the question presented? Depends on who presented it  University:  Whether a federal contractor university’s statutory right under the Bayh-Dole Act… in inventions arising from federally funded research can be terminated unilaterally by an inventor through a separate agreement purporting to assign the inventor’s rights to a third party.

8. Supreme Court  What was the question presented? Depends on who presented it  Roche:  Whether the Bayh-Dole Act’s provision allowing a federal contractor to “elect to retain title” to an “invention of the contractor” allows the contractor retroactively to take intellectual property rights that have been validly assigned to a third party that neither accepted nor benefitted from federal funds.

9. Supreme Court Opinion  Majority opinion (written by Chief Justice Roberts) affirmed Federal Circuit opinion  But majority did not address Federal Circuit’s contract/assignment grounds  Majority decision based on primacy of inventor in owning the rights to her invention  Held that Bayh-Dole did not change that

10. Supreme Court  What did the Court think was the question?  The question here is whether the University and Small Business Patent Procedures Act of 1980—commonly referred to as the Bayh-Dole Act—displaces that norm [that rights in an invention belong to the inventor] and automatically vests title to federally funded inventions in federal contractors. We hold that it does not.  Greatly influenced by the Solicitor Generals’ views

11. Supreme Court opinion  Primacy of inventor’s ownership of patent rights:  "[s]ince 1790, the patent law has operated on the premise that rights in an invention belong to the inventor."  Provisions of Patent Act and precedent consistent with this primacy  Stanford (and U.S. amicus) contended the Bayh-Dole Act vested ownership in university

12. Supreme Court opinion  The majority disagreed:  Nowhere in the Act is title expressly vested in contractors or anyone else; nowhere in the Act are inventors expressly deprived of their interest in federally funded inventions. Instead, the Act provides that contractors may "elect to retain title to any subject invention."  Majority notes that when Congress intends to make such a fundamental change, it does so expressly, citing other statutes

13. Supreme Court Opinion  Employment is not enough, by itself, to automatically vest title in the university  Citing express language of the statute regarding “retaining” rights:  "[t]he Bayh-Dole Act does not confer title to federally funded inventions on contractors 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."

14. Supreme Court opinion  The Bayh-Dole Act is limited:  "order of priority rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more."  This interpretation is supported by the absence of provisions regarding third parties:  "that have neither sought nor received federal funds" where the absence of such remedies "would be deeply troubling... [i]n a world in which there are frequent collaboration between private entities, inventors and federal contractors."

15. Dissenting opinion  Justices Breyer and Ginsberg dissented on the FilmTec v. Allied Signal precedent  Believe the majority decision contrary to purpose of the Bayh-Dole Act  Permitting an inventor to independently license to a third party “tak[es] that invention out from under the Bayh-Dole Act's restrictions, conditions, and allocation rules."

16. Dissenting opinion  As a consequence, public might have to “pay twice” for federally funded research  Also believes the Federal Circuit’s contract interpretation “makes too much of too little” and produces a “technical trap for the unwary”  Also believes that Federal Circuit precedent is flawed on the underlying contract issues as they related to inventor assignments  But concede that the issue not properly briefed and thus not ripe for review

17. Concurring opinion  Justice Sotomayor concurred but agreed with dissent that this precedent flawed  Expresses hope that issue will properly come before the Court in another case

18. Consequences  Perhaps minimal, provided universities properly draft assignment provisions  Increases burdens on technology transfer offices to ensure compliance with Bayh-Dole requirements regarding assignments  Increases potential for inventors to limit effectiveness of Bayh-Dole Act through independent activities  May decrease likelihood of commercialization due uncertainty regarding scope of rights

19. Consequences  May correct “excesses” third parties allege have arisen under Bayh-Dole  Tendency to assert Bayh-Dole “rights” to anything done with any Federal grant monies (voiced by majority opinion)  Overreaching or attempt to comply?  Decision reduces motivation (insofar as compliance-driven  For this reason, may increase likelihood of university/industry collaborations

20. Consequences  Will not address other third party concerns (regarding ownership)  Also does not address the issue raised by the Federal Circuit regarding present assignment of future inventions  Universities could follow Justices Breyer and Ginsberg in crafting contract and assignment language, but not the law  Requires increased efforts by Technology Transfer Offices to “educate” (control?) faculty

21. Consequences  What should universities do?  Educate/outreach to department heads and PIs regarding Bayh-Dole requirements  Make explicit invention disclosure and reporting requirements  Amend/change employment and appointment agreements to make duties under Bayh-Dole explicit  Condition funding on compliance (NIH role)

22. Consequences  What does the opinion say about “first inventor to file”?  Short answer: nothing  A philosophical question  Not always the actual first inventor under current law  Policy reasons  102(g): “who has not abandoned, suppressed of concealed”  Dangerous to read the tea leaves

23. Thank you! Kevin E. Noonan, Ph.D. noonan@mbhb.com www.patentdocs.org MBHB 300 South Wacker Drive Chicago, Illinois 60606-6709 312 913 0001 phone 312 913 0002 fax www.mbhb.com