november 15, 2010 Vol. 36, No. 46 • $10.00 ctlawtribune.com Privatizing Patents Provides Boost To Economy High court to rule on ownership rights of federally funded inventions

By ANTHONY P. GANGEMI rights under the Bayh-Dole Act. Circuit re- The Stanford inventors were under a con- versed the rior to passage of the Bayh-Dole Act tractual obligation to assign rights in the in- district court Pin 1980, ownership rights of federally ventions to Stanford University at the time and decided funded inventions were often retained by of the inventions; they ultimately did execute the case on the U.S. government. As a result, prior to assignments which were recorded in the U.S. basic prop- enactment of the act, the government had Patent and Trademark Office. However, one erty law con- amassed a portfolio of over 25,000 patents, of the inventors executed an assignment of all cepts relating fewer than 4 percent of which were ever his future inventions to a third party compa- to chain of commercialized. ny, Cetus, prior to the inventions and prior to title and bona Commercialization of federally funded in- the execution of assignments to Stanford. fide purchas- ventions has significantly impacted the U.S. In the district court, Stanford argued that ers. The Fed- economy. From 1996 to 2007, it is estimated the Bayh-Dole Act provided that it retained eral Circuit Anthony P. Gangemi that university licensing of inventions, over ownership of the inventions and patents be- held that the half of which were developed using federal cause it had elected to do so under the act. assignment funding, contributed $187 billion to the gross Roche, the successor to Cetus, argued that to Cetus was immediate upon completion domestic product, increased the U.S. gross the Bayh-Dole Act does not supersede the of the invention, based on the language industrial output by $457 billion, and created rights of inventors provided for in Article “hereby assign;” this immediate assign- more than 250,000 new jobs. I, Section 8, Paragraph 8 of the U.S. Consti- ment defeated Stanford’s ownership claims Bayh-Dole was created and enacted with tution, which provides that Congress shall that were based on assignments subsequent the ultimate goal of increasing the commer- have the power “To promote the Progress to the invention, and which were executed cialization of federally funded inventions. Un- of Science and useful Arts, by securing for using the language, “agree to assign.” der Bayh-Dole, while the government retains limited Times to Authors and Inventors the In addition, the Federal Circuit explicitly certain rights to use federally funded inven- exclusive Right to their respective Writings held that “the Bayh-Dole statutory scheme tions, U.S. universities, small businesses, and and Discoveries.” The district court avoid- did not automatically void the patent rights non-profit organizations can elect to retain ed application of the Bayh-Dole Act and that Cetus received.” As a result, the Federal ownership rights in the inventions. As a result, instead held that Roche’s claims of owner- Circuit dismissed Stanford’s appeal while Bayh-Dole promotes commercialization of the ship were barred by California’s statute of holding that Stanford did not own the pat- inventions via privatization. limitations. ents in question and therefore lacked stand- In 2005, Stanford University sued Roche ing to assert them. Molecular Systems for infringing Stanford’s Property Law Concepts The solicitor general and numerous patents disclosing methods for evaluating The Court of Appeals for the Federal academic institutions called for Supreme the efficacy of anti-HIV therapies. Board of Trustees v. Roche Molecular Systems Inc., 487 Anthony Gangemi is a partner in Wiggin and Dana’s Clean Technology Practice Group F. Supp. 2d 1099 (N.D. Cal. 2007). The Stan- and its Patent Practice Group. He prepares and prosecutes U.S. and foreign patent ap- ford inventions and resulting patents origi- plications across a broad spectrum of scientific technologies. Mr. Gangemi is a licensed nated from federally funded research proj- professional engineer and worked as an environmental engineer prior to practicing law. ects, which triggered treatment of ownership You can contact him at [email protected].

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Court review of the case. They argued that ing in Stanford v. Roche. However, until failure to overturn the Federal Circuit will the Supreme Court rules, many existing result in significant economic harm to the employee and research agreements based country by essentially turning off the eco- on the premise that Bayh-Dole governs the nomic engine created by Bayh-Dole. They ownership of federally funded inventions also argued that as it stands, academic in- are in question. stitutions will be burdened with policing While it is hard to predict how the Su- the actions of researchers. preme Court will rule, arguments can be On Nov. 1, the U.S. Supreme Court made that Article I, Section 8, Paragraph 8 agreed to review Stanford v. Roche and of the U.S. Constitution provides Congress its interpretation of the Bayh-Dole Act. with the power to define a framework for In agreeing to hear the case, the Su- granting inventors rights in inventions, preme Court presented a single question: including the power to limit ownership Whether a federal contractor university’s where federal funding was used in the re- statutory right under the Bayh-Dole Act, search and development process. signee lacked standing to enforce the pat- 35 U.S.C. §§ 200-212, in inventions aris- In fact, some federal statutes enacted ent because the inventor “had no right to ing from federally funded research can be prior to Bayh-Dole provided that own- assign it.” FilmTec Corp. v. Hydranautics, terminated unilaterally by an individual ership in certain inventions vested in 982 F.2d 1546, 1550 (Fed. Cir. 1992). inventor through a separate agreement the federal government. Furthermore, Attorneys representing universities, small purporting to assign the inventor’s rights in at least one pre-Bayh-Dole Act case, businesses, and non-profit organizations that to a third party. the Federal Circuit held that a pertinent engage in federally funded research activities Future assignments may be more care- federal statute “clearly provide[d] that are hoping for clear guidance from the Su- fully crafted e.g., ( using “hereby assigns” title to any invention made or conceived preme Court on the rights and obligations instead of “agree to assign”) in an effort to under a [covered] contract ’shall vest’ in of inventors that does not turn on the precise avoid the effects of the Federal Circuit rul- the United States” and that the alleged as- wording of an assignment document. n