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IP: Your employees could unknowingly sign away innovation rights

A Supreme Court decision means you should take another look at your invention agreements

For the casual observer, a glance at the Supreme Court's decision in Stanford v. Roche Molecular Systems or the attendant media coverage this summer probably revealed little, if anything, to lose sleep over. The question presented regarded a university's rights under the Bayh-Dole Act to federally funded inventions. That’s hardly pulse-quickening, unless you work for a university or a company that engages in or uses federally funded research. And that's with all due respect to the Bayh-Dole Act, which has been tremendously important in moving innovations from universities into the marketplace over the last thirty years. Nevertheless, a closer look at this case should send a chill down the spine of any lawyer charged with protecting his client's intellectual property rights.

In the late 1980s and early 1990s, Stanford's Dr. Mark Holodniy developed an assay for HIV using federal funding, along with information and materials he obtained from a company called Cetus. Cetus was later purchased by Roche. When he started at Stanford in 1988, Holodniy “agreed to assign” his ownership rights in any inventions he might make. In 1989, he visited Cetus to learn a technique he later used in his assay. When he did so, he signed a visitor's agreement stating that he would “assign and does hereby assign” to Cetus his interest in any inventions he developed “as a consequence” of what he learned. Finally, around mid-1995, Holodniy actually assigned Stanford his interests in the patent application for his HIV assay. Stanford later sued Roche on the patents. Roche moved for summary judgment based on its ownership interest through the Cetus agreement. Stanford defeated Roche's motion at the District Court, but lost at the Federal Circuit and so appealed to the Supreme Court.

Here's the reasoning: Although Holodniy “agreed to assign” his inventions to Stanford in 1988, that was merely a promise to make a future assignment of his future inventions (giving at most some equitable title to Stanford). On the other hand, his 1989 agreement to “hereby assign” to Cetus was a present assignment of his future inventions, which meant he had nothing left to convey in the 1995 assignment to Stanford. According to the Federal Circuit, this conclusion flowed inevitably from the rule announced in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991). The Court's majority reached the same conclusion without citing FilmTec.

If the FilmTec (now Stanford) rule bothers you, you are in distinguished company. Justice Breyer, writing in dissent, called it “a technical drafting trap for the unwary” and complained that, “given what seem only slight linguistic differences in the contractual language, this reasoning seems to make too much of too little.”


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Cullen Pendleton

Cullen Pendleton, Ph.D., is a litigation partner at Marshall, Gerstein & Borun LLP. He is an alumnus of the University of Houston, the University...

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