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Jun 9, 2011

Supreme Court Decision in Stanford v. Roche Does Not Change Bayh-Dole

The ruling does, however, make it clear that institutions will have to spell out how inventions can be assigned.

Supreme Court Decision in <em>Stanford v. Roche</em> Does Not Change Bayh-Dole

Justices’ 7–2 decision means that academic institutes will have to ensure their interests aren’t weakened by employment contracts they sign with researchers or the agreements those inventors sign with partners. [© fuzzbones - Fotolia.com]

  • For years Stanford University and its allies—mostly in academia but also including President Obama’s administration—insisted that a decision against the school in its long patent dispute with Roche Molecular Systems would cripple the Bayh-Dole Act of 1980 and with it the over $2 billion industry it spawned through technology transfer from academia.

    Earlier this week the U.S. Supreme Court pushed aside that and other Stanford arguments, deciding instead, by a 7–2 margin, that Roche shares ownership with Stanford University in three U.S. patents for a PCR-based test kit to detect and quantify levels of HIV in the blood. The court’s ruling upheld a 2009 decision by the U.S. Court of Appeals for the Federal Circuit that Stanford cannot claim sole ownership of the patents because a researcher from the university who worked in a company later acquired by Roche transferred his rights to the patented innovations.

    “The ultimate effect on the universities might be, number one, they have to do a better job, or try to do a better job, of educating faculty on what they should and should not sign,” said Howard Bremer, emeritus patent counsel for the Wisconsin Alumni Research Foundation (WARF).

  • Tighter Contracts Needed

    Roche has sold the PCR-based HIV kits since 1996. When Stanford sued Roche in 2005, it estimated that the university was owed $250 million in royalties. The university said it owned the patents because the Bayh-Dole Act of 1980 awards patent ownership first to universities and other entities receiving federal funding, then to the federal government, and finally to inventors.

    Roche countered that it need not pay royalties to Stanford or Mark Holodniy, M.D., the researcher who invented the kit, because he signed away his inventor rights to a company called Cetus, which was later acquired by Roche.

    Bremer pointed out that an assignment agreement should specify: “I hereby assign,” as contained in Cetus’ agreement with Holodniy rather than “I agree to assign,” as Stanford worded its agreement. It’s the same argument Justice Ruth Bader Ginsburg made during oral arguments on the case Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems Inc. et. al.

    Steve S. Chang, a shareholder in the intellectual property law firm Banner & Witcoff, noted that the decision should remind academic researchers to seek formal execution of documents for inventions as soon as possible. “The holding here places a greater importance on making sure that you don’t have your employees signing things without vetting them through the legal department first.

    “I don’t know that this decision will dramatically change the way the entities have to do business,” said Chang, who is also an adjunct professor at Georgetown University Law School. “It just means they have to be more careful about making sure to get those documents signed with the actual ‘do-hereby-assign’ transfer language. If Stanford had that language in its initial employee agreement, they would have been given the priority at the federal circuit court.”

  • Stanford Caution to Gov't

    In its response to the Supreme Court, Stanford cited the dissenting opinion of Ginsburg and Justice Stephen G. Breyer. The decision was inconsistent with Bayh-Dole, Breyer wrote, saying that it “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.”

    Stanford argued, “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.”

    The university stopped short of predicting doom for itself and other universities: “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.

  • Importance of Tech Transfer

    A coalition of academic umbrella organizations that originally lined up with Stanford is now stating that it wants to maintain the U.S. tech transfer system. The Association of American Universities, American Council on Education, Association of Public and Land-Grant Universities, Association of University Technology Managers, and Council on Governmental Relations (COGR) together have noted, “We are committed to working together in light of the Supreme Court’s decision to ensure the continued vibrancy of public-private partnerships and success of our shared objectives.”

    What does “working together” mean? “We already have an informal umbrella group that continually looks at ways to improve technology transfer policies and practices, and we will be examining the impact of Stanford v. Roche on those policies and practices. We are not seeking any changes to the Bayh-Dole Act, legislative or otherwise,” the coalition said in a statement to GEN conveyed by BIO spokeswoman Stephanie D. Fischer.

    Universities have ramped up tech transfer over the past decade. Between 2000 and 2009, according to the Association of University Technology Managers (AUTM), total research expenditures from federal and industrial sources for U.S. universities, hospitals, and research institutions doubled (from $27.9 billion to $53.9 billion). The number of invention disclosures also rose during this period (from 11,974 to 20,309), as did patent filings (from 6,073 to 12,109).

    The recession has flattened that growth trajectory, however. While total research spending rose 5% (from $51.5 billion) between 2008 and 2009, the year-over-year numbers were flat for invention disclosures (under 1% growth from 20,115 in 2008) and patent filings (down 0.7% from 12,194 in ’08).

    Worse, license income from tech transfer fell 32.5% from 2008’s $3.4 billion and the following year’s $2.3 billion. AUTM pointed out, though, that the ’08 figure included large one-time payments to Northwestern University, City of Hope National Medical Center, Beckman Research Institute, Sloan Kettering Institute for Cancer Research, and Children’s Hospital of Philadelphia.

    With the economy still shell-shocked by recession, and the recovery sluggish at best, universities and other institutions will be counting on the tech transfer system created by Bayh-Dole to commercialize discoveries and generate additional revenues. Indeed, the Supreme Court didn’t strike down any part of Bayh-Dole. But for institutions to take full advantage, they’ll have to make sure their interests aren’t weakened by either the employment contracts they sign with their researchers or the agreements those inventors in turn sign with collaboration partners.


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