The CREATE Act of 2004 - Fostering a Favorable Environment for Patents Arising from Cooperative Research Endeavors

The patenting of inventions resulting from research collaborations between individuals, between two or more companies, and between universities and companies all stand to gain from the support provided by both Houses of Congress for the Cooperative Research and Technology Enhancement ("CREATE") Act.

On November 20, 2004, the House passed S. 2192 (which is identical to the previously-passed H.R. 2391) to strengthen the chances that valid patents will emerge from joint R&D collaborations. Before this Act, only subject matter that was commonlyowned by the same individual, company or university was entitled to an exclusion from being asserted as prior art against new inventions made by, or within, the same entity.

From its origin, CREATE was a proposal with bi-partisan support. It is intended to promote and to protect patents arising from collaborative research between researchers employed by different entities, such as a university and a company engaged in a common research effort, as well as independent researchers. The Act was proposed in response to a 1997 U.S. Court of Appeals for the Federal Circuit case. This case held that confidential information derived from another, namely the collaboration partner, can be considered prior art, and may serve as evidence of obviousness, against patents for inventions made by the collaborators. OddzOn Products v. Just Toys, Inc., 122 F. 3d 1396 (Fed. Cir. 1997). The OddzOn decision held that 35 U.S.C. 103(c) of the patent statutes excludes from "obviousness-type" prior art the efforts of employees working for the same employer, but does not provide such exclusion to workers for different employers collaborating under a joint research agreement ("JRA").

The Federal Circuit's holding in OddzOn presented a very real threat to collaborative research efforts among researchers employed by different companies or universities. The holding risked stifling the sharing of confidential, non-public information between such researchers. In short, the Court's ruling discouraged collaborative research arrangements.

CREATE amends 35 USC §103 of the patent statutes to provide that patentability is not prevented when the patent is a result of research conducted between more than one entity and is done pursuant to a JRA. The Act defines a JRA as "a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention."

The Act imposes three basic requirements upon any JRA to entitle inventions thereunder to qualify for the prior art preclusion:

1. the JRA must be in effect on or before the date the claimed invention is made;
2. the claimed invention must be made as a result of activities within the scope of the JRA; and
3. the relevant patent application must disclose, or be amended to disclose, the names of the parties to the joint research agreement.

CREATE will apply to an invention made on or after the date of enactment. Additionally, CREATE might apply to pending patent applications claiming inventions made under a qualifying JRA if certain other requirements are met.

It goes without saying that individuals, universities and companies pursuing, or wishing to pursue, collaborative research programs should execute a written JRA that complies with the enumerated requirements prior to exchanging confidential information. Oral arrangements will not suffice.

After CREATE, drafters of JRAs will do well to carefully consider the scope of subject matter to be encompassed by the Agreement. If the subject matter is defined broadly, e.g., joint research in the field of "biotechnology" or "nanotechnology", it will decrease the likelihood that new inventions arising out of the collaboration will be deemed outside the scope of the Agreement, and therefore not protected from the prior art preclusion offered by CREATE. The downside risk of such a broad definition, however, is that it may result in a more expansive bundle of rights being given to the collaborating partner than might otherwise be desired, which may limit future collaboration opportunities with others.

When signed into law by President Bush, CREATE will allay the fears of the collaborative scientific community who have been concerned that sharing confidential information will compromise the patentability of their inventions. Thankfully, parties to a JRA can now share confidential information with each other without fear that the confidential information that is passed can later be considered prior art against inventions arising out of the joint effort.