Will Universities Suffer From Stanford's Patent Defeat?

6 June 2011 5:54 pm

The U.S. Supreme Court today ended a long patent battle over rights to a widely used HIV test, awarding a victory to Roche Molecular Systems Inc. (which developed and marketed the test) while rejecting the royalty demands of Stanford University (whose faculty conceived and patented the test). The test is used in clinics around the world to measure HIV virus in blood and assess treatment. The court denied the university's argument that it should retain exclusive commercial control of the technology, even though Roche had developed it. Instead, the court said, Roche is a co-owner and Stanford doesn't have legal standing to sue the company. (The decision is here.)

"We're very pleased with the outcome. It will strengthen our partnerships with academic institutions," said Roche spokesperson Jacqueline Wallach.

Stanford said in a statement today that the university "respectfully disagrees" with the ruling. It also warned that the "federal government could lose its many rights in [university] inventions, could lose the assurance that the royalties that would have gone to the university are used to further scientific research and education, and could lose the requirement that exclusive licensees will manufacture any products substantially in the United States."

Stanford's lawyers had warned months ago that such a decision would be disastrous for academic patents.

They argued that rejecting the university's claims could undermine 3 decades' worth of patents under the U.S. Bayh-Dole Act, the 1980 law that gives universities and other institutions the right to exploit government-funded discoveries made by their staff.

The court's 7-2 decision, written by Chief Justice John Roberts, was undeniably a setback for Stanford's legal team. Some lawyers say the consequences for other patent holders may be limited, however.

In this view, Stanford got a tough break mainly because it did not secure its intellectual property with a firmly written intellectual property document signed by its faculty. If it were limited to that, most universities could avoid the problem by drafting stronger legal documents.

But others say the implications for patent holders will be much worse. Independent patent attorney Richard Osman, an expert on university-based patents in San Diego, California, said in an e-mail, "This is a big problem" for many institutions that used faculty contracts similar to Stanford's. "The financial consequences will reverberate across Bayh‑Dole contractors that use imperfect language in their employee agreements."

The legal fight began in 2005 when Stanford sued Roche for refusing to pay royalties on three patents held by the university on the HIV test. Attorneys for Stanford have acknowledged that the test was developed jointly by Roche and Stanford faculty members. But they said that the university had exclusive rights because its faculty, who patented the test, had been supported by research grants from the U.S. government. Under the Bayh-Dole Act, universities and other contractors may control such patents exclusively.

But the problem for the university was that Roche had also asked a Stanford researcher, Mark Holodniy, who spent time in Roche's labs during a period of collaboration, to sign a contract. In it, Holodniy assigned his patent rights to the company. The Supreme Court ruled that Holodniy's agreement with Roche was more tightly written than his agreement with Stanford, and that under U.S. law Holodniy could assign his discoveries to whomever he pleased. (Stanford's employee contract said "I agree to assign," while Roche's said, "I … do hereby assign.") The result: Roche won.

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