Roche Beats Stanford

On Monday, June 6, the U.S. Supreme Court issued a fascinating patent-law decision, STANFORD UNIVERSITY v. ROCHE, in which it held that title to the intellectual property in a federally-funded invention does not necessarily vest in the institution receiving those federal funds.

In so doing, the Court limited the scope of some of the language of the University and Small Business Patent Procedures Act of 1980, also known as the Bayh-Dole Act.

The IP in question is to a diagnostic test for HIV involving a polymerase chain reaction (PCR), developed by a Stanford research fellow named Mark Holodniy. Under the Bayh-Dole Act, in a provision that was designed precisely to encourage federally-funded universities to engage in cutting-edge research, the rights to the PCR diagnostic would have been Stanford's, but for a contract Holodniy signed with Cetus, a company where he was a visiting scientist, in which he said he does "hereby assign" his rights to Cetus.

The great thing about PCR is that it does more than simply discover the presence of HIV. It measures the amount of the virus in a patient's blood stream, thus determining whether and to what degree he is benefitting from therapy.

In 1991 Cetus was acquired by, and its rights passed to, Roche.

In 2005, Stanford brought a lawsuit contending that Roche was illegally selling HIV test kits that infringed on Stanford's patents. Roche responded that it was a co-owner of the procedure. The matter went to the Supreme Court, with Stanford claiming that Holoniy had no right to assign to Cetus/Roche, because the right belonged by law to Stanford, so the document in which he purports to make that assignation is void.

U.S. patent law gives the initial IP right to the inventor. The inventor can then assign it away, to one party or another or no one, as he deems best. Indeed, the Constitution gives Congress the authority to secure "to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." It does not give the Congress the authority to secure that exclusive right to an institution employing the authors and inventors. The rather stark individualistic language refers to the authors and inventors themselves.

This decision was not in a strict sense a constitutional decision. It interpreted the language in Bayh-Dodd in such a way as to avoid any conflict with the relevant clause of the constitution. But it certainly did invoke the policy that the majority sees the document's language as endorsing.

Institutions such as Stanford will not suffer any great wound from this decision. They simply have to tighten up the language of their own employment contracts for their postdocs and others to make sure they have the assignation rights from the Holodniys of the world before anyone else puts a well-drafted document in front of any of them. Yet a principle is affirmed, by virtue of the fact that Stanford takes this loss and has to rework its contracts, the principle that the choice, in the first instance, must lie with the Holodniys.

Don't call them trolls anymore!

The use of the term "patent troll" has become familiar, at least to those who follow intellectual property issues.

Of course, it is a contentious term. Nobody calls his own line of work "patent trolling." It's always the other guy. But the idea behind the term is that there are (natural and legal persons) who collect lots of patents they have no intention of using in any productive way, in the hoope that they'll find somebody doing something similar. Then they can threaten a lawsuit for infringement, collect their check, and think of some more patents to file.

It sounds like an excessively easy way to make a living -- and like a matter of throwing sand in the gears of somebody else's productivity. It sounds like, well ... trolling.

I'm told that there is a new, more neutral term for the trolls. Non-practicing entities, or NPEs.

Anyway, on Tuesday of this week the Senate Judiciary Committee held a hearing on potential patent law reform. I recommend the thoughtful testimony of Mark Lemley, professor at Stanford Law.

Here's a single paragraph from near the start of Lemley's disussion:

"There is nothing inherently wrong with either the growth in patent lawsuits or in patent enforcement by non-practicing entities. But a number of patent rules have given these plaintiffs unfair advantages in litigation, allowing them to enforce dubious patents in favorable jurisdictions, and to use the rules of patent remedies to obtain more money than their inventions are actually worth. Many of those problems resulted from troublesome judicial interpretations of the Patent Act, rather than from the Act itself."