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Stanford 'disappointed' in Supreme Court ruling in Roche case

BY LISA LAPIN

The U.S. Supreme Court on Monday issued a ruling in favor of a drug company and against Stanford, concluding a case that has a far-reaching impact on the ownership rights to inventions that result from research funded by the federal government.

The court ruled that Roch is a co-owner with Stanford of patents for testing kits to detect the HIV virus because a Stanford researcher signed a visitor confidentiality agreement that contained an assignment of patent rights when he was doing work at a company later acquired by Roche and because it was a co-owner, Stanford did not have standing to sue Roche for patent infringement.

The court disagreed with Stanford's argument that assigning patent rights to Roche violates the Bayh-Dole Act, which vests the patent rights from federally funded research in universities and not individual researchers.

"We are disappointed with the ruling by the Supreme Court in this case, but will move forward to protect the interests of all parties in inventions created with federal funding, including the interests of the federal government and companies that license technology from Stanford," said Stanford General Counsel Debra Zumwalt.

Zumwalt said in a statement that Stanford University "respectfully disagrees" with the 7-2 decision of the Supreme Court in Stanford University v. Roche Molecular Systems et al., interpreting the Bayh-Dole Act, which governs title to patents that are invented with federal funding. 

Justice Stephen Breyer wrote in the dissenting opinion that the majority's ruling would allow an individual inventor at a university, non-profit or small business to "assign an invention (produced by public funds) to a third party, thereby taking that invention out from under the Bayh-Dole Act's restrictions, conditions and allocation rules," and that is "inconsistent with the Act's basic purpose." 

Both Stanford and the federal government argued that this result was not the intent of Bayh-Dole (as did Senator Bayh in his amicus brief) and has many potential negative consequences for the federal government, which retains certain rights to inventions created with federal funding, for universities and others who create inventions with that funding, and for companies that license the inventions.

For example, Zumwalt said the federal government could lose its many rights in the inventions, could lose the assurance that the royalties that would have gone to the university are used to further scientific research and education, and could lose the requirement that exclusive licensees will manufacture any products substantially in the United States.

In a brief filed on behalf of Stanford, the Association of American Universities (AAU), joined by seven other research associations and five dozen universities, wrote that the Bayh-Dole Act has been "incredibly successful in stimulating innovation by giving universities certainty regarding their ownership of federally funded inventions."

"Universities helped bring to market 4,338 new products between 1998 and 2006, or more than one product a day," the AAU wrote, citing Google (Stanford), Internet Explorer (University of Illinois) and the fibromyalgia drug Lyrica (Northwestern University) as examples.

The AAU also wrote that the law had made an "extraordinary contribution" to the national economy by helping to form more than 6,500 new companies from inventions created under the act, an estimated contribution of $450 billion to the U.S. gross industrial output and the creation of 280,000 new high technology jobs between 1999 and 2007.

After years of unsuccessfully negotiating with Roche in an attempt to convince the company to acquire a license to Stanford's patents, Stanford sued Roche in 2005, alleging that its kits for detecting human immunodeficiency virus (HIV) infringed university patents. 

A federal district court in San Francisco ruled that Stanford owned the patents under the University and Small Business Patent Procedures Act, better known as the Bayh-Dole Act.

A federal appeals court in Washington, D.C., disagreed, saying Stanford shared ownership of the patents with Roche under its interpretation of the Bayh-Dole Act.

The Obama administration has urged the Supreme Court to reverse the 2009 appeals court decision.

In a brief filed on behalf of Stanford, acting U.S. Solicitor General Neal Katyal said the decision creates "serious uncertainty" about title to patents, "frustrates the government's ability to protect the taxpayers' multibillion-dollar investments in research and development" and undermines efforts by Congress "to ensure that federally funded inventions are used to advance the public interest."

The case concerned ownership of three patents for monitoring the effectiveness of HIV treatments. Stanford scientists, including Mark Holodniy, a professor of medicine specializing in AIDS research, developed the patented process with federal funding. While a research fellow at Stanford, Holodniy visited Cetus Corp. (later acquired by Roche) to learn a research technique – known as polymerase chain reaction, or PCR – for producing millions of copies of a specific DNA sequence. (Cetus later sold that line of business to Roche.)

The patent dispute arose from the wording of two agreements Holodniy signed assigning invention rights: a 1988 copyright and patent agreement at Stanford (the SU-18) and a 1989 visitor's confidentiality agreement at Cetus.

The federal appeals court said the phrase "do hereby assign" future patent rights in the Cetus document took effect immediately, trumping the previous "I agree to assign" language in the Stanford agreement, which the court described as a promise of future action.

Stanford had argued that Holodniy had no patent rights to assign to a third party in the first place, because the university retained title to the inventions by fulfilling the requirements of the Bayh-Dole Act.

In a brief filed on behalf of Stanford, former U.S. Sen. Birch Bayh, co-sponsor of the legislation, said inventors may obtain patent rights only if the university waives its rights and the governmental funding agency gives its express approval.

The Bayh-Dole Act "automatically vests ownership rights in the inventions arising from federally funded research in the universities, small businesses and nonprofit organizations responsible for their creation," Bayh wrote.

"Congress did not provide for individual inventors to have transferable ownership interests in patentable inventions created with federal funding. Rather, Congress rewarded individual inventors by requiring their employers to provide them with a share of royalties to be negotiated with the universities or nonprofit organizations."

At Stanford, after administrative expenses paid to the Office of Technology Licensing are deducted, the royalties or income streams from such inventions are shared by the inventor or inventors (one-third), the inventor's academic department (one-third) and the inventor's school (one-third).  The department and school royalties must be used to support scientific research and education.