Stanford v. Roche: Supreme Court Hears Oral Arguments

Executive Counsel highlighted three cases the U.S. Supreme Court recently agreed to review that will impact at once the economic value of existing patents and decisions about where corporate IP investment should be allocated.

This blog has reviewed Microsoft v. i4i (is “clear and convincing” is the appropriate burden of proof for questions of patent invalidity) and Global-Tech v. SEB (how far “intent” goes in proving inducement to infringe).

On February 28, the Supreme Court heard oral arguments for Leland Stanford Junior Universotu v. Roche, a case that will clarify whether the Bayh-Dole Act framework governs the ownership of patent rights when research is federally funded.

In 1988, a Stanford researcher developed a novel process that resulted in a test for AIDS. Unfortunately, though the researcher worked for Stanford (as an employee), he was double dipping and had signed a contract with a private company to work on the same research. The resulting patents were granted to Stanford, but Roche (under license with the private company) has been selling the technology to hospitals since 1996.

In 2005, Stanford accused Roche of infringement and triumphed in federal district court, only to lose on appeal.

So here is the issue in front of the Supreme Court, as framed on SCOTUSBLOG:

Issue: Whether a federal contractor university’s statutory right under the Bayh-Dole Act in inventions arising from federally funded research can be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor’s rights to a third party.

Plain English: A federal statute gives universities the patent rights to any invention created in part with federal funds. The question is whether a university employee involved in the invention can sell rights in the invention to a third party, without the university’s consent.

More than 25 organizations, private companies, and individuals have offered amici curiae to the court. Supporting the appellate court, private companies assert that granting Stanford patent rights would reduce opportunities for the public to benefit from the invention. The Obama Administration and university groups claim the opposite is true, that federally funded research advances the public interest…that’s its purpose.

One thing for valuators to watch: If the Supreme Court rules that the Bayh-Dole Act does ­not control questions of patent ownership, companies acquiring patents from universities and research centers will need to include a review of all related, private company-inventor contracts as part of their due diligence.