A Stanford lawsuit that
began as a patent infringement case against a drug company has evolved into a
dispute over a federal law that promotes the commercialization of
government-sponsored research and protects ownership rights of universities to
inventions arising from government-sponsored research.
The federal law, the Bayh-Dole
Act, has been the
source of billions of dollars of funding to American universities through
royalties generated from federally funded inventions. Funds received under the
Bayh-Dole Act are required to be used for research, education, and payment to
the inventors.
The U.S. Supreme Court
is scheduled to hear arguments Monday (Feb. 28) on Stanford University v. Roche Molecular Systems et al., a case that could
have a significant impact on research universities across the country.
After years of
unsuccessfully negotiating with Roche in an attempt to convince the company to
acquire a license to Stanford’s patents, Stanford sued Roche in 2005, alleging
that its kits for detecting human immunodeficiency virus (HIV) infringed
university patents.
A federal district
court in San Francisco
ruled that Stanford owned the patents under the University and Small Business
Patent Procedures Act, better known as the Bayh-Dole Act.
A federal appeals court
in Washington, D.C., disagreed, saying Stanford shared
ownership of the patents with Roche under its interpretation of the 1980 law.
The Obama
administration has urged the Supreme Court to reverse the 2009 appeals court
decision.
In a brief filed on
behalf of Stanford, acting U.S. Solicitor General Neal Katyal said the decision
creates “serious uncertainty” about title to patents,
“frustrates the government’s ability to protect the taxpayers’
multibillion-dollar investments in research and development” and
undermines efforts by Congress “to ensure that federally funded inventions
are used to advance the public interest.”
The case concerns
ownership of three patents for monitoring the effectiveness of HIV treatments.
Stanford scientists,
including Mark Holodniy, a professor of medicine specializing in AIDS research,
developed the patented process with federal funding. While a research fellow at
Stanford, Holodniy visited Cetus Corp. to learn a research technique—known as
polymerase chain reaction, or PCR—for producing millions of copies of a
specific DNA sequence. (Cetus later sold that line of business to Roche.)
The patent dispute
arose from the wording of two agreements Holodniy signed assigning invention rights:
a 1988 copyright and patent agreement at Stanford and a 1989 visitor’s
confidentiality agreement at Cetus.
The federal appeals
court said the phrase “do hereby assign” in the Cetus document took
effect immediately, trumping the “I agree to assign” language in the
Stanford agreement, which the court described as a promise of future action.
Stanford has
argued that
Holodniy had no patent rights to assign to a third party in the first place,
because the university retained title to the inventions by fulfilling the
requirements of the Bayh-Dole Act.
In a brief filed on
behalf of Stanford, former U.S. Sen. Birch Bayh, co-sponsor of the legislation,
said inventors may obtain patent rights only if the university waives its
rights and the governmental funding agency gives its express approval.
The Bayh-Dole Act
“automatically vests ownership rights in the inventions arising from
federally funded research in the universities, small businesses and nonprofit
organizations responsible for their creation,” Bayh wrote.
“Congress did not
provide for individual inventors to have transferable ownership interests in
patentable inventions created with federal funding. Rather, Congress rewarded
individual inventors by requiring their employers to provide them with a share
of royalties to be negotiated with the universities or nonprofit
organizations.”
At Stanford, after
administrative expenses paid to the Office of Technology Licensing are deducted, the
royalties or income streams from such inventions are shared by the inventor or
inventors (one-third), the inventor’s academic department (one-third) and the
inventor’s school (one-third).
In a brief filed on
behalf of Stanford, the Association of American Universities (AAU), joined by
seven other associations and five dozen universities, wrote that the Bayh-Dole
Act has been “incredibly successful in stimulating innovation by giving
universities certainty regarding their ownership of federally funded
inventions.”
“Universities
helped bring to market 4,338 new products between 1998 and 2006, or more than
one product a day,” the AAU wrote, citing Google (Stanford), Internet
Explorer (University of Illinois) and the fibromyalgia drug Lyrica (Northwestern Univ.) as examples.
The AAU also wrote that
the law had made an “extraordinary contribution” to the national
economy.
“Just last month,
Congress recognized that the ‘economic activity spurred on by the Bayh-Dole Act
includes the formation of more than 6,500 new companies from the inventions
created under the act, an estimated contribution of $450 billion to the U.S.
gross industrial output and the creation of 280,000 new high technology jobs
between 1999 and 2007,'” the AAU wrote, quoting a 2010 resolution by the
U.S. House of Representatives. “Bayh-Dole has also led to ‘the creation
and dominance of the United
States biotechnology and information
technology industries.'”
Filed Under: Drug Discovery
