Bloomberg News

Roche Wins as High Court Limits University Patent Rights

June 06, 2011

(Updates with statement from Roche and university groups beginning in fifth paragraph.)

June 6 (Bloomberg) -- The U.S. Supreme Court, in a ruling that limits the patent rights of research universities, threw out Stanford University’s suit against a Roche Holding AG unit over methods for testing the effectiveness of AIDS treatments.

Voting 7-2, the justices upheld a lower court’s conclusion that a scientist working at Stanford in Palo Alto, California, transferred his rights to the discoveries to a company whose line of business Roche later bought. Under the court’s reasoning, the transfer made the company a co-owner of three disputed patents.

The ruling is a setback for universities, which had contended the transfer was barred under a U.S. law that governs federally funded research. Universities said earlier that a ruling favoring Roche might cast doubt on patents stemming from hundreds of billions of dollars in research.

The decision is a victory for companies that collaborate with universities in research. Intel Corp., Eli Lilly & Co., Johnson & Johnson and Pfizer Inc. were among the companies that supported Roche, the world’s largest maker of cancer drugs.

“We remain committed, as we always were, to partnerships and collaborations with academic institutions such as Stanford,” said Jacqueline Wallach, a spokeswoman for Roche.

The dispute turned on a 1980 law that allocates patent rights among the government, investors and institutions that receive federal money. Writing for the court today, Chief Justice John Roberts said that law didn’t displace the longstanding principle that inventors have first claim to their discoveries.

Intellectual Property

“Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not,” Roberts wrote.

Justices Stephen Breyer and Ruth Bader Ginsburg dissented.

The scientist at the center of the case, Mark Holodniy, was a Stanford employee who performed some of his research at Cetus Corp. Holodniy was working to develop a test for HIV, the virus that causes AIDS, using polymerase chain reaction technology. That technique, called PCR, involves making billions of copies of DNA sequences from a small number of starting molecules.

When Holodniy began working as a fellow at Stanford in 1988, he signed an agreement saying he would assign his patent rights to the university.

Collaboration With Stanford

The following year Holodniy began making visits to Cetus, which was collaborating with Stanford on the research. He signed an agreement giving that company rights to inventions stemming from his work there. Roche later bought Cetus’s PCR business.

Holodniy’s research, along with that of other Stanford employees, eventually led to three patents being issued to the university.

Stanford contended that the 1980 Bayh-Dole Act supersedes any agreement between Cetus and Holodniy. Because the underlying research was funded in part by the federal government, the Bayh- Dole Act barred Holodniy from assigning his rights to Cetus, Stanford said.

Groups representing the biotechnology industry and universities issued a joint statement in support of the law, which they called “extraordinarily successful in moving university discoveries from experimental laboratories to the marketplace.” The groups were the Biotechnology Industry Organization, or BIO, Association of American Universities, American Council on Education, Association of Public and Land- grand Universities, Association of University Technology Managers and Council on Governmental Relations.

Public Benefits

“Although BIO and the undersigned higher education associations held different views on the Stanford v. Roche case, the organizations are united in the desire to ensure that the U.S. technology transfer system continues to generate these public benefits through the robust provisions of the Bayh-Dole statute,” they said in the statement.

Today’s ruling hinged at least in part on the language used in Holidniy’s agreement with Stanford. Roberts pointed to the appeals court’s conclusion that the scientist had promised only to assign his rights at a future date, meaning that the Cetus transfer took priority.

Roberts said that, “with an effective assignment,” universities could secure their claim over the inventions of their employees.

Securing Rights

Universities are already in the practice of securing patent rights for work done by employees, said Steve Chang, a patent lawyer with Banner & Witcoff in Washington.

He said a victory for Stanford would have created “paranoia” in cases involving the transfer of rights by an employee to a third party.

“What would have happened is that each one of those third parties would have had to question whether the assignment they got from the employee effectively transferred anything,” Chang said. “There’s a chance the employee didn’t have rights to assign in the first place.”

The case is Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, 09-1159.

--With assistance from Susan Decker in Washington. Editors: Jim Rubin, Robin Meszoly

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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