By Kevin E. Noonan - -
The pitfalls attendant on collaborations between industry and academia are nicely illustrated in the Federal Circuit's decision last week in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc.
Stanford asserted three patents relating to methods for using polymerase chain reaction (PCR) detection of human immunodeficiency virus (HIV) RNA in blood samples for assessing the efficacy of antiretroviral drug treatment. These patents were:
U.S. Patent No. 5,968,730 (Merigan, Katzenstein and Holodniy, inventors), issued on October 19, 1999:
1. A method of evaluating the effectiveness of anti-HIV therapy of a patient comprising:
(i) collecting a plasma sample from an HIV-infected patient who is being treated with an antiretroviral agent;
(ii) amplifying the HIV-encoding nucleic acid in the plasma sample using HIV primers in about 30 cycles of PCR; and
(iii) testing for the presence of HIV-encoding nucleic acid, in the product of the PCR;
in which the absence of detectable HIV-encoding nucleic acid correlates positively with the conclusion that the antiretroviral agent is therapeutically effective.
U.S. Patent No. 6,503,705 (Kozal, Merigan, Katzenstein and Holodniy, inventors), issued on January 7, 2003:
1. A method of evaluating the effectiveness of anti-HIV therapy of an HIV-infected patient comprising: a) collecting statistically significant data useful for determining whether or not a decline in plasma HIV RNA copy numbers exists after initiating treatment of an HIV-infected patient with an antiretroviral agent by: (i) collecting more than one plasma sample from the HIV-infected patient at time intervals sufficient to ascertain the existence of a statistically significant decline in plasma HIV RNA copy numbers; (ii) amplifying the HIV-encoding nucleic acid in the plasma samples using HIV primers via PCR for about 30 cycles; (iii) measuring HIV RNA copy numbers using the products of the PCR of step (ii); (iv) comparing the HIV RNA copy numbers in the plasma samples collected during the treatment; and b) evaluating whether a statistically significant decline in plasma HIV RNA copy numbers exists in evaluating the effectiveness of anti-HIV therapy of a patient.
And U.S. Patent No. 7,129,041 (Merigan, Katzenstein and Holodniy, inventors), issued on October 31, 2006:
1. A method of evaluating the effectiveness of anti-HIV therapy of a patient comprising: correlating the presence or absence of detectable HIV-encoding nucleic acid in a plasma sample of an HIV infected patient with an absolute CD4 count, wherein the presence or absence of said detectable HIV-encoding nucleic acid is determined by (i) collecting a plasma samples from an HIV-infected patient who is being treated with an antiretroviral agent; (ii) amplifying HIV-encoding nucleic acid that may be present in the plasma sample using HIV primers via PCR and; (iii) testing for the presence of HIV-encoding nucleic acid sequence in the product of the PCR.
All three patents were assigned to Stanford University.
The background facts recited in the Federal Circuit's opinion relate to co-development in the late 1980's and early 1990's of the application of PCR technology to HIV detection by Stanford and Cetus, a private company that developed and owned the PCR technology. These collaborations were governed by a series of written agreements between the company and the University.
In 1988, Inventor Holodniy signed a "Copyright and Patent Assignment (CPA)" agreement as a condition for his employment as a post-doctoral researcher in Inventor Merigan's laboratory governing ownership of any inventions he developed. However, in 1989 he began a series of "regular visits" to Cetus to learn the PCR technique. The company imposed as a requirement that he sign a "Visitor's Confidentiality Agreement (VCA)" with Cetus that purported to assign his rights to any "ideas, inventions and improvements" made by him "as a consequence of" the work he performed at Cetus.
Complicating matters, Stanford and Cetus signed several "Materials Transfer Agreements" permitting Stanford to use PCR-related reagents and information supplied by Cetus during the performance of the work that culminated in the patents-in-suit. In return, Cetus received licenses to the technology developed by the Stanford researchers using the materials supplied by Cetus.
The Stanford Technology Transfer Office and Roche (Cetus' successor-in-interest to agreements between Stanford and Cetus and the PCR technology) began negotiations regarding a license to the patents, but the University sued when Roche refused to agree to a license. Stanford sued Roche for infringement based on Roche's sale of kits for PCR detection of HIV RNA for assessing the efficacy of antiretroviral therapy. Roche raised its purported ownership rights as well as "shop rights" to the claimed invention as affirmative defenses, as a declaratory judgment counterclaim, and procedurally regarding Stanford's standing to bring the lawsuit.
The District Court ruled on summary judgment that Roche's assertion of ownership rights were properly viewed as a counterclaim subject to and barred by the California statute of limitations (which had expired before Roche raised the counterclaim). The Court also ruled that Roche did not have a license to the technology because it failed to obtain consent from the patent holder, Stanford, and that Roche did not have shop rights in the invention. The District Court granted Roche's summary judgment motion that the asserted claims of all three patents were invalid for obviousness.
The Federal Circuit issued a decision vacating the District Court's determinations in a decision by Judge Linn, joined by Judges Prost and Moore. The Federal Circuit affirmed the District Court's determination that Roche's ownership claims were barred by the California statute of limitations. But the CAFC vacated the remainder of the District Court's decision, based on its conclusion that Stanford did not have standing to sue.
The Federal Circuit first dismissed Stanford's objections to Roche's defenses and counterclaims on procedural grounds, finding critically that Roche had raised a question of standing that could properly be raised at any time during a litigation and that was not foreclosed by statutes of limitations. Thus, the CAFC considered it error for the District Court to have refused to consider Roche's ownership counterclaims below. Instead of returning the matter to the District Court, however, the Federal Circuit decided the question (in Roche's favor) in its opinion.
In its decision, the panel went right to the heart of the matter: that Inventor Holodniy had made agreements to assign his rights to multiple parties. Here, however, the Court made an important distinction based on the language of the CPA Inventor Holodniy signed with Stanford. The agreement stated that Inventor Holodniy "agrees to assign" all inventions that he first "conceives or first actually reduces to practice" under the research grants to the University. The Court held that this was not "an immediate transfer of expectant interests" (i.e., a present assignment of future inventions), but "a mere promise to assign rights in the future"; the Court's conclusions were bolstered by further portions of the CPA that required Inventor Holodniy to assign his rights "at an undetermined [future] time." Thus, the panel held that Inventor Holodniy retained rights in his invention at the time he made the further agreement with Cetus; if the Court had ruled otherwise, then Inventor Holodniy would have transferred all his rights to the University prior to signing the agreement with Cetus, and would have had no rights to assign.
In contrast, the VCA Inventor Holodniy signed with Cetus contained the language required by the Federal Circuit to effect an immediate transfer of rights: "I will assign and do hereby assign to CETUS, my right, title and interest in each of these ideas, inventions and improvements" (emphasis in original). With the filing of patent applications naming Inventor Holodniy as an inventor, the Court said, equitable title conferred upon Cetus by Inventor Holodniy's VCA converted "by operation of law" to legal title in the "ideas, inventions and improvements" disclosed in the patent applications that issued ultimately as the patents-in-suit. This negated Inventor Holodniy's subsequent assignment of his rights to these inventions to Stanford, because he no longer had any legal rights to assign (Stanford's rights to the patents presumably derive from the interests of the other named inventors).
The Federal Circuit also refuted Stanford's assertion that Holodniy's later assignment placed them in the position of a "bona fide purchaser for value" with regarding to Cetus' (now Roche's) interests in the patents. The Court found that Stanford had at least constructive notice of Cetus' interests, if only as the result of the terms of several Materials Transfer Agreements between the University and the company. In addition, the Court relied upon common-law agency principles that attribute knowledge to the employer possessed by the employee. (Interestingly, the Court ignored any agency relationship between Inventor Holodniy and the University with regard to failure of the inventor to obtain Stanford's permission or consent to assign his rights to Cetus, since (according to the Court) "Holodniy signed away his individual rights as an inventor, not Stanford's, while performing work for Stanford after promising to assign his rights to the university" (emphasis in original).)
Finally, the Court also rejected Stanford's argument that Inventor Holodniy's assignment to Cetus was voided by the University's rights to federally-funded inventions under the Bayh-Dole Act (35 U.S.C. § 202(d)):
We are unconvinced of Stanford's interpretation of the Bayh-Dole Act in this case. Stanford identifies no authorities or reasons why its election of title under Bayh-Dole had the power to void any prior, otherwise valid assignments of patent rights. Stanford was entitled to claim whatever rights were still available after the Government declined to exercise its option, including the rights of co-inventors Merigan, Katzenstein, and Kozal. However, Holodniy transferred his rights to Cetus more than six years before Stanford formally notified the Government of its election of title. As previously noted, Stanford's invention rights policy "allow[ed] all rights to remain with the inventor if possible," . . . which supports the conclusion that Holodniy still possessed rights at the time he signed the VCA with Cetus. Just as we explained that Bayh-Dole does not automatically void ab initio the inventors' rights in government-funded inventions, . . . we see no reason why the Act voids prior contractual transfers of rights.
(However, in footnote 1 the Court noted that "[w]e express no opinion as to whether Holodniy's execution of the VCA violated any provisions of the Bayh-Dole Act, or whether the Act provides the Government or Stanford some other legal recourse to recover Holodniy's rights.")
Because the Federal Circuit affirmed Roche's rights to the patents-in-suit, Stanford lost standing to sue under the principle that all co-owners must be joined in an infringement lawsuit. Despite Roche's loss of its ability to assert an ownership interest in the patents due to the actions of the statute of limitations, its rights to the patents obtained through Inventor Holodniy's assignment agreement were not extinguished and deprived Stanford of standing to assert infringement against Roche. And because Stanford lacked standing to bring the suit, the District Court lacked jurisdiction to invalidate the asserted patents claims for obviousness, which judgment the Federal Circuit also vacated.
While the outcome is not surprising and indeed is consistent with well-established patent law principles, wherein rights to an invention arise first in the inventor and can be freely alienated by the inventor (absent any agreement, such as an employment agreement, to the contrary), it is clear that this outcome is contrary in spirit to the intent of the Bayh-Dole regime. It illustrates the necessity for universities to provide more than merely agreements to be signed by its researchers. Rather, there is a critical need for information regarding the importance of understanding the interplay of university and corporate interests in inventions that its researchers may develop. This is particularly true for junior researchers like Inventor Holodniy, who no doubt was more interested in gaining access to the reagents and techniques that would further his research interests than to any commercial applications of the technology. These are not illegitimate concerns; indeed, it is preferable for university researchers to be focused on their primary goal, advancing knowledge through original research, than on the practical applications of that research. However, in view of the different motivations and interests of academia and industry, it behooves technology transfer office personnel to have the capacity and authority to at least monitor activities of university research employees when they interact with or obtain technology owned by corporate sponsors or collaborators. This remains a current problem, and one whose importance is demonstrated pointedly by Stanford's loss of standing (and licensing revenue) against Roche in this case.
Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. (Fed. Cir. 2009)
Panel: Circuit Judhes Linn, Prost, and Moore
Opinion by Circuit Judge Linn