United States: Supreme Court Holds That Bayh-Dole Act Does Not Override Third-Party IP Agreements

In Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., __ U.S. __ (2011)(Roberts, C.J.), affirming 583 F.3d 832 (Fed. Cir. 2009), the U.S. Supreme Court affirmed the Federal Circuit's decision that the Bayh-Dole Act does not automatically vest title to federally funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions. Justices Breyer and Ginsberg dissented. This ruling signals that universities and research institutions receiving federal monies and electing to retain title to inventions made with federal monies should carefully monitor third-party inventor agreements and continue to obtain assignments of inventions from employee inventors. Licensees and others seeking an interest in federally supported inventions should confirm that title is properly vested in the contractor institution.

Stanford, PCR, and Patents

The technology arose from a collaboration between the Board of Trustees of Stanford University's (Stanford) Department of Infectious Diseases and Cetus Corporation, the predecessor-in-interest to Roche Molecular Systems (Roche). Working with Cetus employees, Dr. Holodniy, a Stanford scientist, devised a PCR-based procedure to measure the amount of HIV present in a patient's blood. Upon returning to Stanford and over the next few years, Dr. Holodniy and other Stanford researchers tested the procedure. Three Stanford patents were procured. Some of the Stanford patented technology was supported by a grant from the National Institutes of Health (NIH) and therefore subject to the restrictions of the Bayh-Dole Act (35 U.S.C. § 200, "Act"). Meanwhile, Roche conducted clinical trials on the technology and commercialized the procedure. Roche's HIV test kits are used in hospitals and AIDS clinics worldwide.

As a condition for working with Cetus, Dr. Holodniy signed an agreement stating that he "will assign and do[es] hereby assign" to Cetus his "right, title and interest in ... the ideas, inventions, and improvements" made as a consequence of [his] access to Cetus. However, previous to the collaboration and the assignment agreement with Cetus, Dr. Holodniy signed an agreement stating that he "agree[d] to assign" to Stanford his "right, title and interest in" inventions resulting from his Stanford employment. Subsequent to his return to Stanford, the university obtained written assignments of rights in the inventions from the Stanford employees, including Dr. Holodniy for the patented technology.

The Patent Infringement: Lower Courts

Stanford sued Roche for infringement of the Stanford patents relating to the PCR-based procedures for measuring the amount of HIV in a patient's blood. Roche countered that Stanford lacked standing to sue for patent infringement because Roche was a co-owner of the technology by virtue of the previous assignment from Dr. Holodniy to Roche's predecessor-in-interest, Cetus Corporation. Stanford countered that the Roche assignment was void because Stanford had superior rights under the Bayh-Dole Act. The District Court agreed with Stanford and held that under the Act, Stanford's rights were superior to Roche's. The Court of Appeals for the Federal Circuit reversed, holding that the Bayh-Dole Act did not automatically void an inventor's rights in federally funded inventions. The Federal Circuit stated that the Act did not extinguish Roche's ownership interest in the invention and thus, Stanford was deprived of standing. In addition, the assignment provision in Dr. Holodniy's employment agreement was a mere promise to assign rights in the future, unlike Dr. Holodniy's agreement with Cetus, which assigned any rights in inventions to Cetus. Therefore, as a matter of contract law, Cetus obtained Dr. Holodniy's rights in the inventions by this agreement.

The Bayh-Dole Act

The Supreme Court focused its analysis on the congressional intent of the Bayh-Dole Act. In 1980, Congress passed the Bayh-Dole Act to "promote the utilization of inventions arising from federally supported research," to "promote collaboration between commercial concerns and nonprofit organizations," and to "ensure that the Government obtains sufficient rights in federally supported inventions." 35 U.S.C. §200. The Act allocates rights in federally funded "subject invention[s]" between the federal government and federal contractors, defined as any person, small business firm, or nonprofit organization that is a party to a funding agreement. A "subject invention" is any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.

Contractors under the Act may elect to retain title to any invention. To retain title, contractors must fulfill obligations under the statute such as disclosure of the invention to the relevant federal agency within a reasonable amount of time, make a written election within two years after disclosure stating that the contractor elects to retain title, and file a patent application prior to any statutory bar date. The federal government may receive title to the invention if a contractor fails to comply with any of the obligations. Some of the research relating to the patented technology was supported by NIH funding. Stanford fulfilled its Bayh-Dole obligations and elected to retain title to the inventions and patents.

The Court noted that although much in intellectual property law has changed since the first Patent Act of 1790, the basic idea that inventors have the right to patent their inventions has not. "Under the law in its current form, '[w]hoever invents or discovers any new or useful process, machine, manufacture or composition of matter ... may obtain a patent therefore." 35 U.S.C. § 101." Slip Op. at 6. In most cases, a patent may only be issued to an applying inventor, because an inventor's interest is assignable in law by an instrument in writing.

The Supreme Court disagreed with Stanford and the United States as amicus curie that the Act reorders the normal priority of rights in an invention when the invention is conceived or first reduced to practice with the support of federal funds. The Court found no support in the Act for such construction, noting that past explicit divestitures of inventor rights were notably absent from the language of the Bayh-Dole Act. Instead, the Act provides that contactors may elect to retain title to any subject inventions.

The Court also disagreed with Stanford's construction of the Act's language to mean that all inventions made by the contractor's employees with the aid of federal funding vest with the contractor. The Court also stated that the limited scope of the Act's procedural protections supports its conclusion, noting that Act does not provide a single procedural protection for third parties that have neither sought nor received federal funds nor allow inventors employed by federal contractors to contest their employer's claim to a subject invention. This lack of procedural protection only makes sense if the Act applies only when a federal contractor has already acquired title to an inventor's interest. Finally, the Court stated that although unnecessary for its conclusion, the Court's construction is consistent with common practice among parties operating under the Act. Even with the Act in operation, contractors generally institute policies to obtain assignments from their employees. The Court noted that indeed, in guidance documents made available to contractors, the NIH has made clear that by law, an inventor has initial ownership of the invention, and that therefore, contractors should have in place employee agreements requiring an inventor to assign or give ownership of an invention to the organization upon acceptance of federal funds.

Justices Breyer and Ginsburg Dissent

Justices Breyer and Ginsburg began their dissent by noting that in their view, a federal contractor university's statutory right in inventions arising from federally funded research cannot be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor's rights to a third party. However, because the issue, among others, of whether equitable title had passed to Stanford by virtue of the employment agreement was not briefed by the parties, the dissent would vacate the judgment of Federal Circuit and remand the case to provide the parties with an opportunity to more fully argue this issue or related matters.

The dissent began by noting that Congress enacted the Act against a background that often, but not always, denies individual inventors patent rights growing out of research for which the public has already paid. Patents, the Justices opined, sometimes discourages further innovation and competition rather than spurring research and development, citing Justice Breyer's dissent in Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc. 548 U.S. 128 (2006). Thus, an important public benefit can be reflected in legal rules that may deny or limit the award of patent rights had the public already paid to produce the invention. Legal rules of this kind, the Dissent noted, have precedent, for example in an executive order that ordinarily gives the government title to any invention made by government employees who perform research for the government and statutes in specific areas of research that give the government title to inventions made pursuant to government contracts.

Justices Breyer and Ginsburg also disagreed with the Federal Circuit's holding that the Stanford employment agreement did not assign the rights to Stanford, noting that when Dr. Holodniy executed his agreement with Stanford in the late 1980s, patent law appeared to have long specified that a present assignment of a future invention conveyed equitable but not legal title. Under this rule, the Justices reasoned, both the initial Stanford and later Cetus agreements would have only given rise to equitable interests and not legal title. Legal title, therefore, would have been conveyed by the post-invention assignment executed by the inventors to Stanford. The Justices also criticized the 1991 Federal Circuit opinion in FilmTec v. Corp. v. Allied Signal, Inc., 939 F.2d 1568 (Fed. Cir.1991), reh'g. denied, 1991 U.S. App. LEXIS 22407, which appeared to have adopted a new rule that does not distinguish between equitable and legal title without giving any explanation for the change.

The full ruling is available online at http://www.supremecourt.gov/opinions/10pdf/09-1159.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions