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« Court Report | Main | Médecins Sans Frontières Calls on Drug Companies to Pool HIV Patents »

October 12, 2009


"it is clear that this outcome is contrary in spirit to the intent of the Bayh-Dole regime."


That's an understatement. I've talked to others in the know and they agree with me that this decision makes a mockery of the statutory scheme in Bayh-Dole:

First, this ruling misinterprets how title to “subject inventions” works under Bayh-Dole, and especially where title to the “subject invention” initially resides. Under Bayh-Dole, title to the “subject inventions” (i.e., those resulting from federally sponsored research which this Case appears to involve) initially resides with the organization (e.g., Stanford) which carries out the sponsored research. It’s only when the organization elects not to retain title that such title may then pass to the U.S., and only if the appropriate federal agency specifically requests that title pass to it. As the Federal Circuit correctly held in Central Admixture, title is potentially “voidable,” not void, if the organization doesn't choose to retain title, and the appropriate federal agency also fails to request title back.

Second, this ruling is inconsistent with 35 USC § 202(d). 35 USC § 202(d) says that if the university elects not to retain title, the university may request that the appropriate federal agency allow the inventor to retain rights in the “subject invention.” If 35 USC § 202(d) is to make sense, initial title to the “subject invention” must reside with the university under Bayh-Dole.

Third, this ruling appears to frustrate what is intended by 35 USC § 202(c)(7). 35 USC §202(c)(7) expressly prohibits a nonprofit organization, like Stanford, from assigning rights in federally sponsored research to third parties (like Cetus or Roche) without approval of the respective federal agency. That a university researcher (like Holodniy) can so easily defeat the prohibition of 35 USC § 202(c)(7) by signing a VCA that incidentally assign rights to “subject inventions” to third parties seems bizarre.

Fourth, this ruling cannot be so easily reconciled with the Federal Circuit's holding in Central Admixture. In essence, this ruling allows a "third party" (e.g., Roche) to challenge and “void” title to a “subject invention.” That is exactly what the Federal Circuit said in Central Admixture cannot be done. Instead, as was held Central Admixture, only the appropriate federal agency may “void” such title in appropriate circumstances under Bayh-Dole. (In footnote 1, while expressing “no opinion,” Judge Linn does appear to suggest that Bayh-Dole might allow Stanford to recover these rights if the Holodniy’s execution of the Cetus VCA violated Bayh-Dole, so this may not be the end of the story.)

Fifth, Judge Linn’s opinion views Stanford’s argument based on Bayh-Dole as requiring the “voiding” of the VCA assignment by Holodniy of the “subject invention” to Cetus. While Stanford could have phrased its Bayh-Dole argument more artfully in this regard, “voiding” of Holodniy’s assignment to Cetus under the VCA is not what is required by Bayh-Dole. Instead, Holodniy had no title to assign because, by operation of Bayh-Dole, title to the “subject invention” started and remained with Stanford. In fact, Judge Linn’s reliance upon the Townsend case is misplaced because the Eastern District of Tennessee in Townsend also got the issue of “where the title resides” wrong (i.e., in electing to retain title, the University of Pittsburgh was not “exercising its right to title” because it already had title by operation of Bayh-Dole).

Admittedly, Stanford might have avoided this result by phrasing the assignment in its researcher's CPA as a “present transfer of,” not a “promise to,” assign rights in future inventions to Stanford. But allowing such subtle phrasing in an assignment to determine whether or not a university retains title to “subject inventions” from federally-sponsored research, as Judge Linn’s opinion in Stanford University does, appears to frustrate how title to “subject inventions” was intended to work under Bayh-Dole, and especially who has title to those “subject inventions” in the first place. I suspect that the Stanford researcher didn't read the incidental assignment clause in the Cetus VCA, and certainly didn't understand what that assignment clause meant.

Dear EG:

I strive for understatement in an overstated world.

But seriously, I think the issue is whether Inventor Holodniy had anything to assign to Cetus when he signed the VCA. I understand your position, that Bayh-Dole vests title in the institution for all work performed under a Federally-funded research program. I suspect the complicating factor is that Inventor Holdoniy did some of the work on Cetus premises using Cetus reagents and Cetus methods, which were important in achieving the claimed inventions. The status of that work then becomes the issue, and whether the Bayh-Dole umbrella extends that far. There are issues no matter how you come down on that question: if no, you get the result here. If yes, you provide a disincentive for collaborative work between university and corporate researchers, work that usually (albeit not here it appears) is necessary to commercialize inventions initially made at the university benchtop. This is in addition to the more general disincentive regarding Bayh-Dole "march-in" rights, which while they have never been exercised still exist (particularly with regard to inventions directed to public health matters such as AIDS).

I agree that the legal basis for the decision was hair-splitting by the court as to the meaning of the assignment terms in the CPA and the VCA (no surprise that the company got it right, is there?). The dismissal of the Bayh-Dole aspect is where Stanford needs to direct any efforts for rehearing or rehearing en banc, or legislative efforts to make it clear that inventors like Dr. Holodniy have no rights to assign for projects funded from the Federal government through the university.

Thanks for the comment.


"Hair-splitting" isn't the half of it. One key fact that is missing or is at least unclear from the opinion is when Stanford got the fed funding for the research. All that the opinion says is this: "Stanford received government funding for its HIV research through the National Institutes of Health (“NIH”). If the date of the fed funding is after Holodniy signed the Cetus VCA and did his PCR work at Cetus, Linn's opinion might hold up, especially if the invention was complete during the PCR work at Cetus. But if the the fed funding occurred before, then the assignment from Holodniy to Stanford under the CPA takes on a whole different meaning because of Bayh-Dole. In other words, you can't read this assignment in the CPA in the normal manner of a "promise to assign," but as confirming that title in the "subject inventions" (whenever they were created) would go to Stanford. Even without the formal CPA assignment, if the the fed funding occurred before the Cetus VCA/work, Bayh-Dole should allow Stanford to trump on the title as Holodniy had no title he could transfer in any future "subject inventions" if those "subject inventions" based wholly (or partly) on the fed funding.

EG, something must cause title to the invention to be transfered from the inventor. Like an assignment. What instrument exactly effects transfer of title under your view of Bayh-Dole? I assume it is the research grant? And what if a particular inventor was not a party to the research grant? Are you saying that the act of expending grant money effects a transfer of invention rights by operation of law? Just because of the "spirit" of Bayh-Dole? I would think such a legal transer would require more than spirit. And besides, as Kevin hinted, the spirit of Bayh-Dole is to get ideas commercialized. Good luck with that if companies get all of their inventions sucked back to the university if they even breathe on grant money during collaborations.

PS: I don't understand why you are alarmed about the difference between a present and future transfer. That distinction has been in the caselaw for quite some time now. And it is a legally relevant difference that contract drafters may want to rely on--it should not be undermined.

Dear EG:

The earliest priority date for the patents-in-suit is May 1992. The claims all recite methods for using PCR-based detection of HIV RNA in blood samples as a way to assess antiretroviral drug efficacy. So I think it reasonable to assume that the claims were not reduced to practice until after the work done at Cetus.

The problem is that this argument cuts both ways. If the invention was conceived at the time the work was being done at Cetus (thus giving Inventor Holodniy rights in an invention that could be assigned to Cetus), then the invention should have been sufficiently definite that the University's rights under Bayh-Dole should have attached. And the converse also applies.

Also, remember that the court ruled that the Cetus VCA assigned the rights per se (as opposed to the Stanford CPA which was an agreement to assign future rights). Thus, Holodniy could assign to Cetus rights in inventions limited to those he possessed at the time, and arguably not future inventions.

Thanks for the comment.

Dear All,

I realise that this thread is now "old" but given the Supreme Court's interest in hearing this, I thought I would re-open the discussion if I may.

I have limited knowledge of US law, however, as a lawyer from a common law country, I thought I would ask what seems to me an obvious question.

The key Q seems to be whether Holodniy owned rights which he purportedly assigned to Cetus in the VCA. If so, the courts opinion seems to follow, if not, then Cetus acquired nothing and Stanford hold an undivided title to the 3 patents.

Leaving aside arguments on Bahr-Dole and the effectiveness of Stanford's CPA (agreement to assign future rights at some time), I wanted to know the position at common law. That is, even without reliance upon Bahr-Dole or the CPA, why didn't Stanford argue the common law position - that it holds title to the invention as it was an invention reduced to practice by an employee in the course of their employment duties?

I guess my Q is what is the common law position in the USA? Although reliance upon the common law is not the optimal way to regulate ownership, amongst other things, would this not be a way for Stanford to assert ownership? In the UK and Australia, such an argument may well be successful.

Dear Michael:

It isn't a common law question. Congress has the power to grant patents to inventors - indeed, even in the corporate world, the inventor is the applicant, not the corporation. The problem the Supreme Court will address is whether Bayh-Dole changed this for university inventors. Does the inventor have the right until she assigns, or does the university have the right ab initio?

Should be interesting.

Thanks for the comment.

Thanks for the comment.


Yes, I agree with your analysis and what will be argued in the Supreme Court. And yes, very interesting.

My question however is why Stanford didn't run another argument originally (in addition to the construction of Bayh-Dole) in which they asserted ownership at common law citing Supreme Court authorities Standard Parts Co. v. Peck, 264 U.S. 706 (1933), and Speck v. North Carolina dairy Foundation, 307 S.E. 2d 785 (N.C. 1983) rev'd 319 S.E.2d 139 (1984)?

I would have thought running an argument that Holodniy was "employed to invent" may have been persuasive and worth a go.

If that common law argument was successful, Stanford would have held the ownership rights in priority to Cetus. Cetus would never have acquired any ownership and would presumably have lost the patent infringement action.

If I am right, there must have been a good reason not to run the common law aregument. I may be wrong however as to the common law position in the US.


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