Be Diligent About Assignment Wording. Stanford Loses Big To Roche in HIV Patent Dispute.

The best way to learn is from other’s mistakes. So, if you are a corporate entity that engages in product development or a university looking to capitalize on your researcher’s ingenuity LISTEN UP.  Stanford learned a valuable (and yes, costly) lesson this week at the hands of the Supreme Court.  While this wasn’t a real surprise to those of us watching the case there is a good take away here:  assignment wording matters. Make sure, make DARN SURE, you get an agreement from every potential inventor in your organization that they actually assign, not just agree to assign, all developed intellectual property to the company (or university).  And monitor your inventors to ensure that they do not execute any contradictory assignments.

The Facts. The entire opinion can be found here but the boiled down facts are:

Back in the 80’s, Stanford University received federal funding to advance HIV research. Not having the appropriate lab facilities to carry out the research, Stanford investigated the potential for utilizing the established labs of nearby Cetus, a local bio-med company. In 1988, Cetus began to collaborate with scientists at Stanford University’s Department of Infectious Diseases to test the efficacy of new AIDS drugs. A certain Dr. Holodniy joined Stanford as a research fellow in the department around that time. When he did so, he signed an agreement stating that he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment there. Holodniy’s supervisor arranged for him to conduct research at Cetus. As a condition of gaining access to Cetus, Holodniy was required to sign an agreement stating that he “will assign and do[es] hereby assign” to Cetus his “right, title and interest in . . . the ideas, inventions, and improvements” made “as a consequence of [his] access” to Cetus. Working with Cetus employees, Holodniy devised a PCR-based procedure for measuring the amount of HIV in a patient’s blood. Upon returning to Stanford, he and other Stanford employees tested the procedure. Stanford secured three patents to the measurement process.

Roche Molecular Systems then acquired Cetus’s PCR-related assets. After conducting clinical trials on the HIV quantification method developed at Cetus, Roche commercialized the procedure. Today, its HIV test kits are used worldwide.

The Outcome. Stanford sued Roche, claiming exclusive ownership of the technology under the Bayh-Dole Act, which essentially allows government contractors to retain the rights to intellectual property developed in part or in whole using government funding.  Note the word allows.  The Act does not vest exclusive rights in the contractor (or university, in this case) if the contractor does not have the rights to begin with.  In this case, Stanford required the inventor, Dr. Holodniy, to execute a simple “agreement to assign”  all developed intellectual property to the University.  Stanford did not require Dr. Holodniy to execute an actual assignment.  Cetus, however, required that Dr. Holodniy execute an actual assignment in favor of Cetus.  Stanford was stuck taking its losing argument all the way to the Supreme Court, which presumably was a costly venture, because it failed to ensure that its researcher actually assigned the patented technology to Stanford.  The result is that Stanford is now a co-owner of the patented technology with Roche, instead of an exclusive owner of the technology with an incredibly valuable license deal with Roche.  We don’t know what the patented technology is worth, but just the mere fact that Stanford pressed so hard is an indicator that it must be worth … eight figures?  nine figures?  Ten figures?

The Lesson. What is the take away?  The wording of an assignment agreement can make a huge difference in realizing the fortune that follows some patents. If you are a business entity or university engaged in technology development, check your files.  Make sure that your assignment agreements state that the inventors actually assign their inventions to your entity, and get those assignment agreements executed.  And hope that your folks haven’t already given away the next globally used HIV test.

(c) 2011 Stephen C. Thomas, registered U.S. Patent Attorney | contact at: sthomas@hctlaw.com

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