IP Alerts

IP Alert
IP Alert: U.S. Supreme Court Clarifies Vesting of Patent Rights to Federal Contractors Under the Bayh-Dole Act

June 7, 2011

On June 6, 2011, the U.S. Supreme Court issued its decision in Stanford v. Roche, a 7–2 ruling affirming the United States Court of Appeals for the Federal Circuit. The Court held that the Bayh-Dole Act does not automatically vest title to federally funded inventions in federal contractors, nor does the Bayh-Dole Act authorize contractors to unilaterally take title to such inventions.

The Bayh-Dole Act addresses rights to patentable inventions that are developed by federal contractors using federal funds. Many federal contractors are universities, small businesses, or nonprofit entities. The Act is intended to promote the use and commercialization of inventions from federally supported research and to promote collaboration between commercial concerns and organizations such as universities.

Section 202(a) of the Act states that a contractor may "elect to retain title" to inventions developed with federal funds. In this case, a Stanford University researcher was under a contractual obligation to assign invention rights to Stanford. Despite this obligation, the researcher actually assigned his rights to an invention to a different entity, a predecessor-in-interest to Roche. Both Stanford and Roche claimed title to the invention. Stanford’s argument was that pursuant to the Bayh-Dole Act, it possessed the statutory right to the invention, such that the later assignment was ineffective.

The Supreme Court disagreed with Stanford, stating "Since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor. The question here is whether the University and Small Business Patent Procedures Act of 1980—commonly referred to as the Bayh-Dole Act—displaces that norm and automatically vests title to federally funded inventions in federal contractors. We hold that it does not." The Court noted the provision of the Act that provides that contractors may “elect to retain title,” and held that this language confirms that the Act does not immediately "vest title.”

This decision has implications for individual inventors as well as federal contractors for whom the Bayh-Dole Act is applicable, and will have impact especially in connection with university technology transfer agreements, due diligence studies, and assignment policies. The Act underscores the need for such entities to be diligent and for competent legal advice in these areas.

If you have any questions about this decision, please contact Fitch Even attorney John M. Naber, the author of this alert. Mr. Naber has special expertise in the realm of university technology transfer agreements.

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