Supremes give thumbs-down to Stanford in patent case

OCTOBER TERM, 2010
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as isbeing done in connection with this case, at the time the opinion is issued.The syllabus constitutes no part of the opinion of the Court but has beenprepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
BOARD OF TRUSTEES OF THE LELAND STANFORD
JUNIOR UNIVERSITY v. ROCHE MOLECULAR
SYSTEMS, INC., ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
No. 09–1159. Argued February 28, 2011—Decided June 6, 2011
In 1985, a small California research company called Cetus began todevelop methods for quantifying blood-borne levels of human immu-nodeficiency virus (HIV), the virus that causes AIDS. A Nobel Prize winning technique developed at Cetus known as PCR was an integral part of these efforts.In 1988, Cetus began to collaborate with scientists at StanfordUniversity’s Department of Infectious Diseases to test the efficacy of new AIDS drugs. Dr. Holodniy joined Stanford as a research fellow in the department around that time. When he did so, he signed anagreement stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment there. Holodniy’s supervisor arranged for him to conduct research at Cetus to learn about PCR. As a condition of gaining access to Cetus,Holodniy was required to sign an agreement stating that he “will as-sign and do[es] hereby assign” to Cetus his “right, title and interestin . . . the ideas, inventions, and improvements” made “as a conse-quence of [his] access” to Cetus. Working with Cetus employees,Holodniy devised a PCR-based procedure for measuring the amount of HIV in a patient’s blood. Upon returning to Stanford, he and other Stanford employees tested the procedure. Stanford secured three patents to the measurement process. Roche Molecular Systems acquired Cetus’s PCR-related assets. After conducting clinical trials on the HIV quantification method de-veloped at Cetus, Roche commercialized the procedure. Today, itsHIV test kits are used worldwide. The University and Small Business Patent Procedures Act of 1980
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BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.
Syllabus
(Bayh-Dole Act or Act) allocates rights in federally funded “subjectinvention[s]” between the Federal Government and federal contrac-tors. 35 U. S. C. §§201(e), (c), 202(a). The Act defines “subject inven-tion” as “any invention of the contractor conceived or first actuallyreduced to practice in the performance of work under a funding agreement,” §201(e), and provides that contractors may “elect to re-tain title to any subject invention,” §202(a). Because some of Stan-ford’s research on the HIV measurement technique was funded by the National Institutes of Health (NIH), the Bayh-Dole Act applied.In accordance with the Act’s requirements, Stanford notified NIH that it was electing to retain title to the invention and conferred on the Government a license to use the patented procedure.
Petitioner, the Board of Trustees of Stanford University, filed suitagainst respondents (Roche), claiming that their HIV test kits in-fringed Stanford’s patents. Roche responded that Holodniy’s agree-ment with Cetus gave it co-ownership of the procedure, and thus Stanford lacked standing to sue it for patent infringement. Stanford countered that Holodniy had no rights to assign because the Univer-sity had superior rights under the Bayh-Dole Act. The District Court agreed with Stanford and held that under the Bayh-Dole Act, Holod-niy had no rights to assign to Cetus. The Court of Appeals for theFederal Circuit disagreed, concluding that Holodniy’s agreement withCetus assigned his rights to Cetus, and thus to Roche. It also found that the Bayh-Dole Act did not automatically void an inventor’s rights in federally funded inventions. Thus, the Act did not extin-guish Roche’s ownership interest in the invention, and Stanford wasdeprived of standing.
Held: The Bayh-Dole Act does not automatically vest title to federallyfunded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions. Pp. 6–15.
(a) Since 1790, patent law has operated on the premise that rights in an invention belong to the inventor. See, e.g., Gayler v. Wilder, 10 How. 477, 493. In most cases, a patent may be issued only to an ap-plying inventor, or—because an inventor’s interest in his invention is assignable in law by an instrument in writing—an inventor’s as-signee. See United States v. Dubilier Condenser Corp., 289 U. S. 178,
187. Absent an agreement to the contrary, an employer does not have rights in an invention “which is the original conception of the employee alone,” id., at 189; an inventor must expressly grant those rights to his employer, see id., at 187. Pp. 6–8.
(b) Stanford and amicus United States contend that, when an in-vention is conceived or first reduced to practice with the support of federal funds, the Bayh-Dole Act vests title to those inventions in theinventor’s employer—the federal contractor. Congress has in the
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Cite as: 563 U. S. ____ (2011) Syllabus
past divested inventors of their rights in inventions by providing un-ambiguously that inventions created pursuant to certain specifiedfederal contracts become the Government’s property. Such unambi-guous language is notably absent from the Bayh-Dole Act. Instead, the Act provides that contractors may “elect to retain title to any sub-ject invention,” §202(a), defining a “subject invention” as “any inven-tion of the contractor conceived or first actually reduced to practice inthe performance of work under a funding agreement,” §201(e).
Stanford contends that “invention of the contractor” means all in-ventions that a contractor’s employees make with the aid of federalfunds. That reading assumes that Congress subtly set aside two cen-turies of patent law in a statutory definition. This Court has rejected the idea that mere employment is sufficient to vest title to an em-ployee’s invention in the employer. Stanford’s reading also rendersthe phrase “of the contractor” superfluous since the definition alreadycovers inventions made under a funding agreement. Construing thephrase to refer instead to a particular category of inventions con-ceived or reduced to practice under a funding agreement—inventions “of the contractor,” that is, those owned by or belonging to the con-tractor—makes the phrase meaningful in the statutory definition. And “invention owned by the contractor” or “invention belonging to the contractor” are natural readings of the phrase “invention of thecontractor.”
Section 202(a), which states that contractors may “elect to retaintitle,” confirms that the Act does not vest title. Stanford reaches the opposite conclusion, but only because it reads “retain” to mean “ac-quire” and “receive.” That is certainly not the common meaning of “retain,” which is “to hold or continue to hold in possession or use.” You cannot retain something unless you already have it. And §210(a)—which provides that the Act “take[s] precedence over anyother Act which would require a disposition of rights in subject inven-tions . . . that is inconsistent with” the Act—does not displace the ba-sic principle that an inventor owns the rights to his invention. Onlywhen an invention belongs to the contractor does the Bayh-Dole Act come into play. The Act’s disposition of rights does nothing morethan clarify the order of priority of rights between the Federal Gov-ernment and a federal contractor in a federally funded invention that already belongs to the contractor.
The Act’s isolated provisions dealing with inventors’ rights in sub-ject inventions are consistent with the Court’s construction of the Act. See §202(d). That construction is also bolstered by the Act’s limitedprocedural protections, which expressly give contractors the right to challenge a Government-imposed impediment to retaining title to a subject invention, §202(b)(4), but do not provide similar protection for
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BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIV. v. ROCHE MOLECULAR SYSTEMS, INC.
Syllabus
inventor and third-party rights.
Stanford’s contrary construction would permit title to an em-ployee’s inventions to vest in the University even if the invention was conceived before the inventor became an employee, so long as the in-vention’s reduction to practice was supported by federal funding. It also suggests that the school would obtain title were even one dollarof federal funding applied toward an invention’s conception or reduc-tion to practice. It would be noteworthy enough for Congress to sup-plant one of the fundamental precepts of patent law and deprive in-ventors of rights in their own inventions. To do so under such unusual terms would be truly surprising. Had Congress intended such a sea change in intellectual property rights it would have said soclearly—not obliquely through an ambiguous definition of “subject invention” and an idiosyncratic use of the word “retain.”
The Court’s construction of the Act is also reflected in the common practice of contractors, who generally obtain assignments from their employees, and of agencies that fund federal contractors, who typi-cally expect those contractors to obtain assignments. With effective assignments, federally funded inventions become “subject inventions” and the Act as a practical matter works pretty much the way Stan-ford says it should. The only significant difference is that it does sowithout violence to the basic patent law principle that inventors own their inventions. Pp. 8–15.
583 F. 3d 832, affirmed.