Last week’s Supreme Court decision underscores the necessity of careful drafting in employment and inventorship agreements. Stanford University lost out on the ownership of valuable patent rights because of poor word choices. The problem? Stanford's assignment form used the future tense (I agree to assign) rather than the present tense (I hereby assign).
The factual circumstance was not all that unusual. Stanford hired a research fellow, Dr. Mark Holodniy, to work on HIV research. At the time of the hire, Dr. Holodniy signed Stanford’s Copyright and Patent Agreement, by which he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment at the University. Thereafter, Stanford loaned Holodniy to a small California research firm, Cetus, to collaborate on HIV research. Cetus required Holodniy to sign its Visitor’s Confidentiality Agreement that provided Holodniy “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.
Holodniy worked at Cetus for a period of time on HIV testing processes before returning to Stanford. As a result of further research conducted at Stanford by Holodniy and others, Stanford was awarded several patents relating to HIV measurement techniques. Cetus was eventually acquired by Roche Molecular Systems, by which Roche specifically acquired all rights that Cetus owned in its Visitor’s Confidentiality Agreement. Thereafter, Roche commercialized the HIV quantification methods developed by Holodniy at Cetus, and now sells its HIV test kits to hospitals and HIV clinics world-wide.
Stanford sued Roche for patent infringement, claiming that Roche’s HIV test kits infringed Stanford’s HIV measurement patents. Roche argued that it had an ownership interest in the HIV inventions by virtue of its acquisition of Holodniy’s Visitor’s Confidentiality Agreement. Stanford disputed Roche's ownership interest, pointing out that Holodniy had no rights to assign to Cetus since he had earlier signed Stanford’s Copyright and Patent Agreement.
The district found that Cetus’ Visitor’s Confidentiality Agreement transferred Holodniy’s inventorship rights to Cetus. However, the district court also held that, because the development of the HIV measurement technique was funded by federal money, the Bayh-Dole Act superseded the assignment to Cetus and placed ownership of Holodniy’s invention with the recipient of the federal funds, Stanford.
The Federal Circuit disagreed with the district court. It held that the choice of words in Stanford’s Copyright and Patent Agreement did not transfer to Stanford a present interest in Holodniy’s inventorship in HIV measurement research. The Federal Circuit determined that Stanford’s Copyright and Patent Agreement constituted only an agreement to assign in the future. On the other hand, there was an actual, present transfer of Holodniy’s inventorship rights by virtue of the present assignment provided for in Cetus’ Visitor’s Confidentiality Agreement. The Federal Circuit also held that the Bayh-Dole Act does not change normal invention ownership rules, even when the invention is developed with federal funds.
The Supreme Court granted certiorari on the issue whether the Bayh-Dole Act supersedes normal contract language pertaining to assignment of an inventorship interest when funding is provided by the federal government. The Supreme Court made clear that, since the initial patent act of 1790, an invention is owned in the first instance by the inventor, and there must be an actual present assignment of the rights in the invention in order to cause a transfer from the inventor. The Supreme Court further confirmed that the Bayh-Dole Act does not usurp this established law.
The problem with Stanford’s choice of words was that “agree to assign * * * right, title and interest in” only created a promise to assign in the future, not a present assignment. A further problem was that Stanford’s language related only to inventions, and did not seek to transfer broader rights for ideas, improvements and issued patents.
On the other hand, Cetus' agreement specifically provided that Holodniy “will assign and do[es] hereby assign.” The language assigned the inventor’s “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus. Not only does the Cetus language constitute a present-day assignment of Holodniy’s present and future inventions, but it provides an expansive assignment of ideas, inventions and improvements.
While the Supreme Court holds that the Bayh-Dole Act does not change, but supports, traditional law of patent ownership and transfer notwithstanding the use of federal funds in the development of the invention, Stanford lost exclusive patent rights from poor choice of language in its employment agreement with Holodniy. Critically:
- The inventor is the initial owner of an invention, even if the invention is developed during the course of the inventor’s employment.
- The inventor’s employer must obtain a present-day assignment in writing from the employee-inventor in order to obtain an interest in the invention. A promise to assign rights in the future is not good enough to create a present assignment.
- An assignment of rights in an invention is too narrow. The employer should make certain that the assignment covers the ideas, improvements and issued patents, as well.
- Funding of invention development by the federal government does not, without more, change these rules.
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