U.S. Supreme Court Holds That the Bayh-Dole Act Does Not Automatically Vest Title to Federally Funded Inventions in Federal Contractors

June 7, 2011

On June 6, 2011, the Supreme Court in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 563 U.S. ___ (2011), held that the University and Small Business Patent Procedures Act of 1980–popularly known as the Bayh-Dole Act, 35 U.S.C. §§ 200-212–does not automatically vest title to federally funded inventions in federal contractors.  In so holding, the Court reaffirmed the "basic principle of patent law that inventors own their inventions."  Slip op. at 15.

At issue in Roche were ownership rights in patents claiming a procedure for measuring blood-borne levels of HIV, the virus that causes AIDS.  The procedure was devised by employees of Stanford University in collaboration with a California research company called Cetus.  Id. at 2.  As a condition of gaining access to Cetus’s facilities, one of the Stanford employees signed an agreement stating that he "will assign and do[es] hereby assign" to Cetus his "right, title and interest in each of the ideas, inventions and improvements" made "as a consequence of [his] access" to Cetus.  Id. (internal quotation marks omitted).  Stanford eventually obtained assignments from each of its employees and patented the procedure.  Id.  Roche, meanwhile, acquired Cetus’s assets and began commercializing the procedure in HIV test kits.  Id. at 2-3. 

Stanford subsequently sued Roche for patent infringement, claiming that because Stanford’s HIV research was federally funded, Stanford had "superior rights in the invention under the Bayh-Dole Act."  Id. at 5.  The U.S. Court of Appeals for the Federal Circuit disagreed, concluding that Roche had co-ownership rights in the patents by virtue of the inventor’s assignment to Cetus, and that the Bayh-Dole Act did not automatically extinguish that ownership interest.  Id. at 5-6.  The Federal Circuit held that as co-owner of the patents, Roche could not be sued for infringement.  Id.

The Supreme Court affirmed in an opinion by Chief Justice Roberts, joined by Justices Scalia, Kennedy, Thomas, Alito, Sotomayor, and Kagan.  The Court began by recognizing the "general rule that rights in an invention belong to the inventor"–a rule grounded in the very first Patent Act of 1790 and every Patent Act since.  Id. at 7.  Accordingly, the Court explained, "[i]n most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights."  Id. at 7-8.

Having identified the relevant background "norm," id. at 1, the Court turned its attention to the Bayh-Dole Act itself, which gives federal contractors the right to "elect to retain title to any subject invention," 35 U.S.C. § 202(a), defined in the Act as "any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement," id. § 201(e).  The Court then rejected Stanford’s contention that the Act "reorders the normal priority of rights . . . by vesting title to federally funded inventions in the inventor’s employer" (i.e., the contractor) instead of the inventor himself.  Slip Op. at 8.

In reaching that conclusion, the Court first noted that where "Congress has in the past divested inventors of their rights in inventions," it has done so "unambiguously" in the text of a statute.  Id. (citing 42 U.S.C. §§ 2182, 5908).  But "[s]uch language," the Court concluded, "is notably absent from the Bayh-Dole Act."  Id.  The Court next considered two key statutory phrases in the Act’s text: "invention of the contractor" and "elect to retain title."  The former, the Court held, is most naturally read to mean inventions "owned by or belonging to the contractor"–a meaning consistent with the view that the Act was not intended to cover "all inventions made by the contractor’s employees with the aid of federal funding."  Id. at 9 (emphasis added) (internal quotation marks omitted).  Turning to the latter phrase–"elect to retain title"–the Court concluded that Congress’s use of the word "retain" simply "confirms that the Act does not vest title" to federally funded inventions in federal contractors, because "[y]ou cannot retain something unless you already have it."  Id. at 11. 

Thus, the Court held, "[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."  Id.  The Court expressed confidence that if Congress had intended otherwise–that is, if it had intended "to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions"–"it would have said so clearly–not obliquely through an ambiguous definition of ‘subject invention’ and an idiosyncratic use of the word ‘retain.’"  Id. at 14. 

Justice Sotomayor joined the Court’s opinion in full, but wrote separately to express concerns about the Federal Circuit’s holding that the inventor’s assignment to Cetus trumped a separate agreement to assign future inventions executed between the inventor and Stanford.  Justice Sotomayor acknowledged, however, that Stanford had not challenged the Federal Circuit’s decision on that ground.  Justice Breyer filed a dissenting opinion, joined by Justice Ginsburg, in which he argued that the Court’s construction of the Bayh-Dole Act was contrary to the statute’s "basic purposes" because it "allows individual inventors, for whose invention the public has paid, to avoid the Act’s corresponding restrictions and conditions."  Id. at 5 (Breyer, J., dissenting).  Justice Breyer would have remanded the case to the Federal Circuit to allow the parties to address "more fully" such matters as whether the Federal Circuit’s interpretation of the inventor’s agreements was correct and whether the Bayh-Dole Act requires a federally funded employee to assign his rights to his federally funded employer.  Id. at 10.

The Court’s decision in Roche should be welcome news to those who collaborate with universities and other federal contractors.  The Court’s decision allows such collaborators to rely on contracts to protect their interests in their inventions, without risk that they could be stripped of their contractual rights when they collaborate with a contractor using federal funds.  See id. at 14 (majority opinion) (noting that under Stanford’s erroneous construction of the statute, a "school would obtain title to one of its employee’s inventions even if only one dollar of federal funding was applied toward the invention’s conception or reduction to practice").  Under the Court’s interpretation in Roche, the Bayh-Dole Act does not displace such contracts–or the "general rule that rights in an invention belong to the inventor."  Id. at 7.

Gibson, Dunn & Crutcher LLP   

Gibson Dunn filed an amicus brief in Roche in support of Roche on behalf of Intel Corporation, Eli Lilly and Company, Johnson & Johnson, Life Technologies Corporation, Pfizer Inc., and SAP America, Inc., urging the interpretation of the Bayh-Dole Act adopted by the Supreme Court.

If you have any questions about Roche, or would like to talk with one of our lawyers about a patent appeal, please call Thomas G. Hungar at 202-955-8558 or Matthew D. McGill at 202-887-3680.  These partners, resident in our Washington office, have participated in virtually every recent patent case in the Supreme Court and in many of the leading cases in the Federal Circuit.  

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